With British business awash with Brexit uncertainty, it has never been more important for the government to simplify our complicated tax system.
The UK tax code is now more than 20,000 pages long. It’s made up of over 1,000 tax reliefs and exemptions. At around 10m words, it is 12 times the length of the Bible.
Now more than ever in his Autumn Statement, the chancellor needs to deliver stability, greater certainty and significantly less change to the UK tax system.
Many governments have talked about simplifying taxes. But this has been merely lip service. In fact, recent proposals have not only failed to simplify the tax regime, they have the potential to add greater complexity.
An example of this is the government’s recent consultation on reforming corporation tax loss relief. This referred to the objective of “simplifying and modernising the tax system”. The opposite was true. The proposals outlined an excessively complex approach to imposing restrictions on loss set off for the largest companies.
While it is clearly important that the UK has a corporate tax regime which attracts investment, there needs to be a balance between reducing rates and changes which may have detrimental results. Frequent and unpredictable changes in the tax code not only introduce uncertainty and instability for British business, but there is also a risk that they could deter foreign investment.
There’s a growing reluctance to simplify existing legislation and a tendency to introduce additional complexity in new legislation.
That’s why, ahead of this year’s Autumn Statement, we are calling on the chancellor to focus on simplifying our tax code.
The Office of Tax Simplification (OTS) must be given a stronger role in challenging both HMRC and the government on whether new legislation will simplify taxes, or at least avoid introducing excessive complexity. The OTS should be involved at an earlier stage of all tax legislation.
If the government is serious about simplifying the tax system, we also need to see stronger coordination of the devolution of taxes across the UK. Devolution does not lend itself to simplification. It introduces new measures into the mix and the more there is, the less simple it can become.
The government should therefore implement the devolved taxation powers in a way that minimises complication and does not increase the burden on businesses or individual tax payers.
Great care will also be needed to ensure that bringing new tax powers back from Brussels post Brexit does not simply add further complications.
A simpler tax code will reduce the opportunities for avoidance, and so the government’s business tax strategy in the Autumn Statement should aim to remove distortions. We believe that having complex anti-avoidance measures causes problems for compliant businesses, while only creating new opportunities for determined tax avoiders.
The time has now come for the government to get serious about simplifying Britain's tax laws.