Government should fill the scrutiny gap left by Office of Tax Simplification abolition, says Edward Troup

The government should address important gaps in tax legislation scrutiny caused by Kwasi Kwarteng’s abolition of the Office of Tax Simplification (OTS), argues a new Institute for Government guest paper by former HMRC permanent secretary Edward Troup.

Published today, The Office of Tax Simplification: What do 12 years of the OTS tell us about the role for an independent body in tax policy making?, says expectations were set too high when George Osborne created the OTS in 2010. 

Hamstrung from the outset by a lack of clarity around the term ‘simplification’ and from Osborne’s refusal – like previous chancellors – to weaken or remove power from ministers to make tax law, the OTS was excluded from the budget and finance bill process and had no ability to stem the flow of new tax complexity.

This “inevitable clash with the politics of taxation” meant the OTS “was doomed to failure”, but it was successful in improving tax administration and highlighted weakness in the scrutiny of tax legislation. Troup, therefore, argues that Kwarteng’s abolition of the OTS means an independent body is needed to help fill these gaps.

This new body should be established with lower – but more realistic – expectations of improving tax administration. There is also a need for more post-legislative scrutiny of tax legislation, including evaluation of the wider costs and burdens of tax policy. These changes, argues Troup, would make for a better functioning tax system, from which taxpayers, HMRC – and future chancellors – would all benefit.

Troup also calls for the creation of a body with an advisory role to scrutinise and comment publicly on legislation during its passage through parliament – identifying and addressing issues of drafting and administration and consistency with the principles of good tax policy. 

Edward Troup said:

“The OTS was in some ways doomed to failure from the start by ambiguity about what ‘simplification’ meant. Its creation by Osborne and its abolition by Kwarteng were arguably symbolic acts. But the OTS made important contributions to improving tax administration and highlighted weaknesses in the scrutiny of tax legislation. Taxpayers, HMRC and future chancellors would all benefit from these gaps being filled by a new independent body with more realistic expectations.”