Opinion Former Article

MPs encouraged to probe value for money of tax reliefs

The Chartered Institute of Taxation (CIOT) welcomes the Public Accounts Committee opening a new inquiry into the UK’s management of ‘tax expenditures’ tax reliefs.1

Tax expenditures mean non-structural tax reliefs where government opts to forego tax in order to pursue social or economic objectives, such as tax credits for companies’ R&D costs and income tax relief on pensions contributions.

John Cullinane, CIOT Tax Policy Director, said:

“We greatly welcome the Public Accounts Committee taking up this important issue.

“Governance of tax reliefs in the UK is not systematic or proportionate to their value or the risks they carry. There is a mismatch between the significant effort in government and to an extent Parliament that rightly goes into new tax measures, and the relative lack of attention to how effective those measures prove over time. This is particularly the case with tax expenditures.

“Unless HMRC and the Treasury actively monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, we cannot assume that these reliefs will be value for money.”

The Public Accounts Committee (PAC) inquiry follows a report published in February this year by the National Audit Office (NAO) which raised concerns about the effectiveness of the Treasury’s and HMRC’s management of tax expenditures. It found that there is no formal framework governing the administration or oversight of tax expenditures, and that while the Treasury and HMRC have begun steps to increase their oversight of tax expenditures and more actively consider their value for money, these will not be sufficient on their own to address value for money concerns.

The NAO’s findings were similar to those expressed in the 2017 Better Budgets report, produced by CIOT along with the Institute for Government and Institute for Fiscal Studies. This report called for proper and systematic review of tax changes including the growth in tax reliefs.2

This June the PAC will question officials from the Treasury and HMRC on management of tax reliefs, the number of reliefs and the government’s understanding of whether they represent value for money. The committee is now inviting evidence on the questions of accountability and value for money in tax expenditures raised by the NAO report.

Notes for editors

1. More on the PAC website here. The Committee is now inviting evidence on the questions of accountability and value for money in tax expenditures raised by the NAO report: make your submissions before close of Friday 5 June 2020

2. The 2017 Better Budgets report – produced by CIOT in partnership with the Institute for Government and the Institute for Fiscal Studies – called on the Government to institutionalise evaluation of tax measures – that is provide for systematic post-legislative review of whether measures are achieving their objectives at an acceptable cost, with Parliament holding government to account for this. The report acknowledged that the political and technical nature of much of tax policy can inhibit effective upfront scrutiny. That places more weight on the importance of effective evaluation, but at the moment this is poorly done. The report identified a particular need for more effective evaluation of tax expenditures. More here.

3. NAO’s ‘The management of tax expenditures’ report, February 2020.

4. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

 

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

 

The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)

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