Tax Expertise Marginalised

Tax Expertise Marginalised

After ignoring concerns from professional bodies about HMRC service levels and treating the Office of Tax Simplification more like an annoying wasp buzzing in its ear, the government gives the distinct impression that it doesn’t want to listen to tax experts.

A budget without expert input

Prior to this year’s Spring Budget, the various professional tax bodies wrote an open letter urging the Chancellor to prioritise investment in HMRC service levels. The letter described all the disruption and delays to the service, many of which I’ve highlighted in recent months, however the Budget came and went without any extra funding. Then, whoop-dee-doo, this week – two months after the Budget, the professional bodies finally received a response from the Financial Secretary to the Treasury, Victoria Atkins.

Ms Atkins acknowledged that some of HMRC’s service levels “have not been where they want them to be” but pinned the blame on a high volume of repayment claims, IT issues due to system upgrades, and diverting resources to provide support for Ukraine visa processing. But on the bright side, the minister said customer satisfaction is around 80% and the investment in building a digital tax system between now and 2030 will reduce all sorts of errors and will help taxpayers to get their tax and payments right first time.

The letter was short and dismissed the concerns of the tax professionals in a way that pretty much said, “What do you lot know about tax, anyway?” But is it really surprising, I recall a 2016 quote from Michael Gove who said, “people in this country have had enough of experts from organisations with acronyms…”

Victoria Atkins’ response is merely the most recent example of a long tradition of government ministers not listening to the tax profession; the best example of which is the abolition of the OTS, where the government decided it would rather take the nuclear option than, ‘heavens forbid’ actually taking advice from financial experts and accountants.

Office of Tax Simplification abolished

Read the May 4th blog

This is a topic that I covered in depth in my May 4th Blog, ‘Tax needs to be simplified’, and its demise, if anything, has made tax simplification anything but simple.

The OTS quietly got on with its work for many years until Liz Truss’s hatchet man, Kwasi Kwarteng abolished it and why, I hear you ask. Tax professionals to a man, consider this to be a retrograde step and most are convinced that the ill-fated Truss administration did not want the OTS panel of independent experts pointing out that perhaps their tax plans may be seriously flawed.

Last month’s announcement by Victoria Atkins of 23 technical tax updates, came with a promise to simplify the tax system, and while the government was keen to point out that simplification now sits with the Treasury and HMRC, curiously the tsunami of consultations had far more references to the work of the OTS than anyone else. Shame that such a body no longer exists!

Sympathy for HMRC

I never thought I’d say this, but I have some sympathy for HMRC at the moment. They’re already stretched to their limit, largely because previous Chancellors have slashed their numbers and now the government have added the weighty task of tax simplification to their to-do list.

To make matters worse, whenever HMRC is called up in front of a select committee to talk about simplification, it must feel like someone meeting their partner’s parents for the first time and being constantly reminded how wonderful the ex-boyfriend/girlfriend was. The tax department was given the “in-law” treatment this week when the Treasury Committee questioned HMRC’s Jonathan Athow about tax reliefs and the first question was about – you guessed it – the Office of Tax Simplification!

HMRC’s Treasury Committee hearing

The main witness for the defence was HMRC’s Jonathan Athow, who has the wonderful title of Director General, Customer Strategy & Tax Design, whatever the hell that actually means!

When he was asked about the OTS he explained that HMRC’s approach was to “embed tax simplification in the process of policy development”, which he claimed was different from the OTS who he stated “were not involved in the process of developing policy”.

Whilst admitting that the tax system over time has become more complex, with nearly 1200 separate reliefs he said: “It’s the cumulative effect of tax reliefs, other changes in the tax system, the number of taxes and the entire tax system that adds to the complexity, and challenges with making the tax system simpler come up against other policy objectives”. It was a rather convoluted way of saying that HMRC had failed to simplify the tax system because the Chancellor of the day had decided against adopting their suggestions.

 Tax Expertise Marginalised: What can be done?

One thing is crystal clear, with all the tax debacles in recent year Kwasi Kwarteng et al, we clearly need an external independent body to supervise government tax policy and its implementation but operating independently of the UK Government. Perhaps something like The Financial Conduct Authority (FCA) the regulator for all financial services firms and financial markets in the UK.

The FCA was originally partly modelled on the now abolished OTS, but with one crucial difference, the FCA has teeth!

Tax Expert’s View

The Government’s attitude to the various independent tax bodies suggestions for reform and simplification of the tax system is a bit like blaming the fire brigade for not putting out the fire that you started because you didn’t agree with their suggestion of using water.