To reduce taxpayer confusion, cut down costly errors and avoid embarrassing u-turns, the Government must change the way it makes tax and budget decisions, argues a new report. The current tax policy making process is not fit for purpose.
Published today by the Chartered Institute of Taxation (CIOT), Institute for Fiscal Studies (IFS) and Institute for Government (IfG), the Better Budgets report outlines ten steps toward making better tax policy.
Welcoming the announced move to a single Budget each year – an interim recommendation from the institutes in September - specific recommendations include:
- Publishing clear guiding principles and priorities for tax policy. Governments frequently give little sense of direction on tax policy making planning difficult;
- Improving consultation, in particular ensuring that consultations happen before key decisions have been made;
- Use external, public reviews of aspects of the tax system as a means of opening up public debate.
Processes within the Treasury and in Parliament also need to improve. The Treasury needs a more robust policy making process involving more challenge before measures make it into the Budget speech. And Parliament needs to improve the quality of its scrutiny of both the Chancellor’s proposals and of the impacts of measures once implemented.
Taken together, these changes recommended in the report would mean fewer, better designed measures and a more coherent tax system commanding wider public support.
Bill Dodwell, President, CIOT, said:
"The sheer volume of tax changes makes it difficult for the Government to consult effectively, early and widely enough on all the measures they bring forward. Parliament and taxpayers struggle to keep up with all the changes. Review of the impact of measures is patchy at best. Holding, in effect, two Budgets a year has helped fuel this proliferation of tax measures. Moving to a single annual fiscal event provides a real opportunity to get off the treadmill of constant change – reducing the strain on the Government’s tax policy resources and freeing up time for better consultation and scrutiny of those proposals that are put forward."
Jill Rutter, Programme Director, IfG, said:
"The quality of tax policy making matters to every citizen in the country, and currently too much about the way we make tax policy is taken for granted or thought to be the sole province of the Chancellor and the Treasury to decide. Philip Hammond has taken the first big step with his announcement of a return to a single main annual fiscal event – he needs to stick to that commitment and use this opportunity for further reform. In particular we need to overhaul the internal Budget processes, to ensure there is more challenge from within and Parliament needs to improve the way it scrutinises tax proposals before they are implemented – and their effectiveness once they are."
Paul Johnson, Director, IFS, said:
"Tax policy is too important to leave to the Chancellor alone. We need a more open policy making process as a route to a better tax system. The lack of any explicit tax strategy allows policy to be made on the hoof and makes it harder to engage the public in a much needed rational debate about tax. The prize of a better tax system is enormously valuable and a better policy making process would make that prize more attainable"
For more information please contact:
George Crozier at CIOT (firstname.lastname@example.org / 020 7340 0569)
Bonnie Brimstone at IFS (email@example.com / 07730 667013)
Nicole Valentinuzzi at IfG (firstname.lastname@example.org / 07850313791)
Notes to editors
1. The full report can be found here.
2. An earlier letter from the three organisations reflecting initial findings from the project recommended a move to a single principal annual fiscal event. The Chancellor accepted this recommendation in the Autumn Statement
3. The Institute for Government is an independent think tank that works to make government more effective.
4. The Institute for Fiscal Studies (IFS) is Britain’s leading independent microeconomic research institute. IFS was launched in 1969 with the principal aim of better informing public debate on economics in order to promote the development of effective fiscal policy. Its research remit is one of the broadest in public policy analysis, covering subjects from tax and benefits to education policy, from labour supply to corporate taxation. For more information please visit ifs.org.uk.
5. The Chartered Institute of Taxation (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. It draws on its members’ experience to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities.