Is the Office of Tax Simplification getting it right?

As the Treasury runs the rule over the Office of Tax Simplification (OTS), Phil Hall, AAT Head of Public Affairs & Public Policy makes his own assessment.

The Treasury is currently undertaking its first five-year review of the OTS. 

The primary function of the OTS is to provide advice on tax simplification to Treasury ministers, both on request and as the OTS considers appropriate. 

Criticism 

Much is made of the fact the tax code more than doubled in length between 1997 and 2005, and that the UK has had the largest tax code in the world since 2009 when it overtook India in that regard. 

This phenomenon has also misleadingly been used as a criticism of the OTS. The argument is that as the tax code has lengthened since the OTS was created, it has clearly failed in its objective. Such criticism fundamentally misunderstands the remit of the OTS and its good work. 

While the length of the tax code may be far from ideal, it is not a useful measure of success as far as the end-user, i.e. the taxpayer, is concerned. The most important issue is simplicity from the taxpayers’ perspective, not from the perspective of an accountant or tax expert. 

A smartphone is easily used by many millions of consumers, but very few of them understand how the circa-1,500 parts of a phone actually work. The complexity of its workings in no way prevents the user from having a simple experience. Another criticism has been a perceived lack of independence, because of both the location of the OTS (inside Treasury buildings) and the fact that many of its staff are on secondment from HMRC and Treasury. However, to relocate simply to increase the appearance of independence would not be a good use of taxpayer’s money. Likewise, access to HMRC and Treasury staff is a positive. 

The OTS has a board of only four individuals, restricting its breadth of experience. 

AAT has previously suggested there is room for a communications professional to join its ranks – given the need to effectively communicate its analysis, recommendations and results, and minimise misrepresentation. Doubling the number of board members to eight or at least increasing it to six would strengthen its breadth of experience. 

Successes 

An early OTS report – reviewing tax reliefs – was arguably successful, given it led to the abolition of dozens of reliefs. The OTS’s work on both approved and unapproved share schemes recommended changes that were subsequently accepted and benefitted the UK’s two million employee shareholders. 

More recently, its review into claims and elections is likely to result in HMRC improving the functionality of the personal tax account and the business tax account, as well as ensuring HMRC improves its online forms and supporting guidance. This will have a major impact on hundreds of thousands of taxpayers, both personal and business.  

What next for the OTS?  

Firstly, it is already obliged to take into account the potential impact of options it puts forward on the Government’s other objectives for the tax system, especially with regard to revenue implications. This could be expanded given the nation has amassed more than £400bn in Covid-related debt. 

Secondly, given the Chancellor is obliged to publicly respond to OTS reports that have been instigated by the Treasury, it makes sense for the same obligation to exist for reports that the OTS has itself instigated. 

Thirdly, the OTS should be involved in the development of new taxes at the earliest opportunity as it is fighting tax complexity in current legislation on one hand, while the Government creates more with the other.   

Phil Hall is AAT's Head of Public Affairs and Public Policy.

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