06 March 2017

In our second pre-Budget guest blog, John Whiting, the founding director of the Treasury’s Office of Tax Simplification (OTS), reflects on the recommendations in our Better Budgets report. His successor, Paul Morton, also asks whether simplification should become a new guiding principle for tax policy.

John Whiting

Many of the recommendations in Better Budgets, the joint report by the Institute for Government, Institute for Fiscal Studies and the Chartered Institute of Taxation, resonate with the OTS and our way of doing things, so it was pleasing to be able to contribute to the study and to see some of our ideas featured.

The report envisages a ‘simple vision’ end point: ‘…a Budget process that contains fewer measures, which are better thought out – and can be implemented…without imposing unreasonable burdens…’. That is entirely in keeping with one of our central tenets: that the biggest cause of complexity in taxation is simply ‘change’. It is a conclusion echoed in many of our reports, so reducing the volume of change and ensuring changes are better thought through can only be good for simplification.

The report’s calls for more guiding principles and increased use of ‘road-maps’ echoes one of the main recommendations in our competitiveness report: business wants consistency in the way taxes are developed and more certainty about the whole process.

It’s also good to see a resounding endorsement of our ‘activist’ approach to consultation. We don’t claim to have invented the idea of going out and gathering evidence (and certainly would never patent it!) rather than sitting back and waiting for comments. But, especially with the volume of consultations flying around (which is in principle a good thing), those wanting input – and the OTS has always depended on input from others – have to go out and get it. It’s not just that we have always been a tiny unit and so need the views of others. We want to make sure we get comments from well beyond the ‘usual suspects’ (vital as those will always be) and ensure we have really representative views. Plus, it makes the usual suspects’ task easier if we go and talk to them.

The report rightly touches on the way the UK ‘does’ tax legislation as needing debate. Our tradition of writing everything down so that taxpayers are ‘…taxed by the plain words, not by any intendment’ is a vital principle, but it comes at a price of length and complexity. Although the report doesn’t formally call for using different ways of writing legislation, it is something that needs debate. (We are dusting off our idea of ‘layered legislation’ and will be republishing our paper shortly.)

There are important comments on scrutiny of tax legislation. One feature that deserves more emphasis is the value of post-implementation reviews. The OTS’s early reliefs report highlights that there is no process of review built in to the UK tax policy process, meaning there is no regular check on whether measures are still achieving objectives, or if they are value for money for the UK. In a letter to the Better Budgets team, Andrew Tyrie MP, Chair of the Treasury Committee, suggests this is a failing that needs remedying and makes the interesting suggestion of a role for the House of Lords in this work.

Should the OTS have a role in certifying or commenting on new measures, as the report discusses? That would be difficult given our resources, but we have said simplification needs to be a consideration in the policymaking process, perhaps evidenced on tax information and impact notes. We think simplification is considered much more these days, and will claim the credit for that. But, as this report shows, there is much more that could be done. The OTS will continue to play our part in trying to improve the UK’s tax legislation.

Paul Morton

Paul MertonThe Better Budgets report raises many searching questions about tax policy making. The proposed steps include establishing clear guiding principles and priorities and extending the road map approach. Should simplification, or at least simplicity, be one of the guiding principles? Should the road map include simplicity in the description of the intended destination? Where trade-offs arise between simplicity and fairness should we have a bias towards one or the other?

The report notes that a consequence of continuous change is that it is hard for individual taxpayers to make the long-term decisions they need to. The Organisation for Economic Co-operation and Development (OECD) is currently looking at tax certainty and is analysing the results of a business survey on certainty. Again, there may be trade-offs between certainty, fairness and simplicity, although one would expect certainty and simplicity to be close cousins. As with other aspects of tax policy making, it will be important that UK thinking reflects and contributes to the broader international work facilitated by the OECD and other international bodies.

Although few ‘users’ of the tax system are volunteers, it seems right that HM Revenue and Customs (HMRC) thinks of us as customers, as it aims to do. As with any customer-facing operation, it is very helpful that HMRC gives a great deal of thought to the ‘user experience’ when designing systems. However, does that thinking about user experience feature as much as it should in the policy making process? Can we design features of the tax system which better the ‘user experience’ and therefore make it easier to comply? A more comprehensive and intuitively correct result would also increase confidence. Some have suggested that the tax system could be like a smartphone (very complex inside but easy to use). We seem to have managed the ‘complex inside’ rather well but is it easy to use?

No other country has an Office of Tax Simplification, so we are uniquely placed to keep simplicity and simplification in the centre ground as we reflect further on this excellent report.

This blog represents the views of the authors and not the Institute for Government. 

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