The Office of Tax Simplification (“OTS”) recently published its 2021/22 annual report. Last month, the OTS also published its review of tax simplification which Chartered Accountants Ireland participated in earlier this year. Just days later, the Chancellor responded to the OTS review via a letter from the Financial Secretary to the Treasury (“FST”). The OTS has also recently published a scoping document for its review of hybrid and distance working.
The review of simplification report sets out what drives tax complexity, and some ways that officials making tax policy can work to prevent or mitigate that complexity. It also sets out the aims of the OTS for the next five years, reaffirming its focus on those who need simplicity the most; individuals and small businesses.
The OTS makes clear that it is not a policy-making body. With that in mind, the report has only one recommendation; that the principle of simplification should be better embedded in the general tax policy making process.
A framework of questions which officials and ministers may wish to consider when developing and re-visiting policy to look for complexity and mitigation is also suggested. These are as follows:-
- Are the rules, their purpose and their consequences easy to understand and predict?
Are the tax rules logical, with their purpose understood and the outcomes of choices clear and running with the grain of the lives and businesses they encompass? Do they add complexity when taken in aggregate with the immediate and wider existing rules?
- Are the rules and their administration taking advantage of modern developments, including technology?
Can technology shoulder some of the administrative or process burden for taxpayers? Can technology help manage the complexity without undermining informed choice? Is this technology available and accessible for the majority, and how are the digitally excluded or challenged served? Are tax policies capable of being implemented in a digital manner?
- Is it easy enough to comply with the rules?
As well as the core rules themselves, can taxpayers understand the administration, processes, and obligations? Whether they are in scope, what they need to do and when? Is the cost to taxpayers, intermediaries, advisers, and government proportionate?
- Can taxpayers be better supported? Are there ways that intermediaries can take some of the burden away from taxpayers in reporting or payment, or by directing taxpayers to HMRC guidance? Is the guidance fit for the audience? Are advisors enabled to help their clients manage their tax affairs, including through access to taxpayer data and HMRC systems?
The report recognises that this should neither be as simple nor as rigid as a ‘checklist’ but considered proportionately and meaningfully.
The letter from the FST on behalf of the Chancellor acknowledges the importance of tax simplification and agrees that the OTS should place an emphasis on simplifications that will support individuals and small businesses. However it states that it “is important to acknowledge that there are trade-offs Ministers and officials must make between simplification and other policy objectives”.