The Chancellor’s decision to abolish the Office of Tax Simplification (OTS) is hugely disappointing, and a ‘very strange first step’ to getting serious about simplification, says the Chartered Institute of Taxation (CIOT).
The Government announced today that: “Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government. It will therefore abolish the Office of Tax Simplification and set a mandate to the Treasury and HMRC to focus on simplifying the tax code.” (Paragraph 4.13, The Growth Plan 2022).
John Barnett, chair of the CIOT’s Technical Policy and Oversight Committee, said: “The decision to abolish the OTS is hugely disappointing.
“The OTS has done superb work since it was set up 12 years ago, and every Finance Act includes OTS-inspired changes, notwithstanding that these have generally been limited to simplifying administration and technical processes, rather than more radical reforms.
“That the OTS’s most ambitious suggestions have been ignored – or, at worst, that Chancellors have used the OTS as a parking-lot for the too-difficult-to-implement – is down to the decisions of ministers rather than the OTS.
“Bluntly, the challenge the OTS has had is that, while ministers buy in to the principle of simplification, whenever it has come up against political or revenue obstacles ministers have shied away from taking difficult decisions. If a significant reform costs the Exchequer money the government has rejected it. If a significant reform produces losers who would make a fuss it has been rejected as well.
“The Government says that it will ‘set a mandate to the Treasury and HMRC to focus on simplifying the tax code’. It is unclear what this will mean in practice. If it means ministers and senior officials placing a higher priority on simplicity in the tax system that is very welcome. However we find it hard to see how abolishing the OTS, the independent body with a mission to review the tax system and recommend simplifications, will make that more likely.
“If you are serious about simplification, abolishing the one body with responsibility for it, is a very strange first step.
“If tax simplification is to be truly embedded across government, the OTS should be given a revised watchdog role: scrutinising new proposals, and considering whether they introduce unnecessary complexities into the tax system. The OTS could also have taken on post-enactment review of new legislation, examining the actual impact of measures a few years on compared to that envisaged, and identifying ‘lessons to learn’ for future policy development.
“One thing the OTS has had a particular good record on is effective consultation, reaching out proactively to meet with affected groups around the country to identify burdensome complexity in the tax system. This work will be missed. Will HMRC and the Treasury be taking this on?
“The OTS has also been a crucial interface between HMRC/Treasury and external experts in the private sector, professional bodies and academia. Embedding tax simplification must continue to engage external expertise and not simply allow a retreat into institutional group-think.”