Is tax too complex?
HMRC say, “Tax doesn’t have to be taxing” a statement that’s frustrating on a number of different levels. In 15 things they don’t want you to know number one is, “it’s not easy” and it’s not. So basically HMRC makes a very complex system that’s almost impossible to get 100 percent right then they investigate you and clobber you because you have failed to do the impossible. It’s like something out of 1984.
If you are outside the industry you may find this hard to believe, but HMRC could pick up the books of ANY business and start to pull them apart. Oh and another thing that is very much out of 1984 is ‘The Ministry of Simplification‘. Honestly, you couldn’t make it up!
Here Dave Hartnett is quizzed about what he’s doing to make things more simple, he says, “I think the Office of Tax Simplification will come up with some pretty good proposals…”
Here is the uncorrected transcript, to see the whole meeting transcript click here.
Mark Garnier: I come back to a point that Mr Tyrie made a little bit earlier. Is it not the case that the tax code is just so ferociously complex that it makes it very difficult for people to be able to comply with it? Indeed, we have had two sets of witnesses here, one of whom is somebody I disagree with, so I will not necessarily mention his name, but he quite categorically said that if anybody wants to operate in this country, they should learn this, but he was rather a pompous man. The rest of them, including the unions, all agree that this was a big problem. It is just very, very difficult indeed to be able to comply with this country’s tax code. You talk about how we are trying to aim for more simplification, but even after the Budget last year, one of the comments made was that the rate of increase in complexity of the tax code had merely slowed down; it had not been reversed. We talk about this Office of Tax Simplification, but the fact of the matter is: what is genuinely being done about proper, significant, tax simplification? At the end of the day, should we not perhaps rip up the tax code altogether and start again from scratch to make sure that people can understand what they are supposed to be doing?
Dave Hartnett: Let me say two things again. The first is that we have succeeded in taking almost £600 million of burdens created by the tax code off business in the last five years and aim to do more. I think the Office of Tax Simplification-I sit on its board with one of my Treasury colleagues-is determined to simplify. The sort of thing that we want to simplify is the approach for small business. One of the most interesting pieces of research we have done recently shows that a small business starting up that is not, if I can put it this way, on the straight and narrow on taxation within about nine months might not get on the straight and narrow until we intervene-which usually comes with a big bill. That has to be improved significantly, and we are looking at how to do that. I think the Office of Tax Simplification will come up with some pretty good proposals in relation to the taxation of small business.
I think that some of the changes to the plan for Pay As You Earn- particularly the simplification of end-of-year procedures in the next couple of years, probably ending the life of forms P45 and P46, which the nation at least knows the names of, if not what they do in the tax system-will help a great deal with individuals’ understanding of the tax system. We are determined to do more, and there will be an announcement shortly about a new, additional programme for the Office of Tax Simplification.