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CIOT, IFS and IfG report on making better tax policy

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The Chartered Institute of Taxation, Institute for Fiscal Studies and Institute for Government have published their joint report, Better budgets: making tax policy better, outlining ten steps for improving the processes around tax policy making (see The hoped-for result would be fewer, better designed tax measures. The report highlights the chancellor’s announcement in the 2016 Autumn Statement of the move back to a single principal fiscal event per year as an important enabler of the other changes. The ten steps are:

  • Stick to the commitment to a single principal annual fiscal event and cut down Budget measure proliferation;
  • Establish clear guiding principles and priorities for tax policy: chancellors should make an early statement in a new parliament to spell out their priorities;
  • Extend the road-map approach: based on the example of the 2010 corporate tax road map;
  • Start consultation at an earlier stage: the government should stick consistently to the commitments in its ‘new approach to tax policy making’;
  • Develop more active approaches to consultation: ensure that responses come from a wide range of sources;
  • Prepare the ground for future reform and engage the public: make use of independent external reviews to open up the discussion of options;
  • Address the perceived capability gap around tax policy making: build on initiatives aimed at allowing insiders to develop deeper tax expertise in the Treasury and policy expertise in HMRC;
  • Overhaul internal processes: make decisions more collectively, by establishing a Budget cabinet committee and introducing more powerful early expert challenge;
  • Enhance parliament’s (and the public’s) ability to scrutinise tax proposals: including oral evidence sessions at the start of Finance Bill committee stages; and
  • Institutionalise and enable evaluations of tax measures: introduce effective and routine post-legislative review of whether measures are achieving their objectives at an acceptable cost.

Commenting on the report, IfG programme director Jill Rutter said: ‘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.’ It is particularly important ‘to ensure there is more challenge from within’.

IFS director Paul Johnson 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.’

CIOT president Bill Dodwell said: ‘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.’