The Office for Budget Responsibility (OBR) has included a section in its 2019 Fiscal risks report (see bit.ly/2LDqqaZ) highlighting the risks to public finances from the government’s inconsistent approach to monitoring the effectiveness of tax reliefs.
The report states that:
the government does not know the overall cost even of the tax reliefs and expenditures it can identify and only publishes the costs of around one in six of them;
the cost of policy-motivated tax expenditures HMRC has identified, approaching 8% of GDP, is large in absolute terms and by international standards;
it is not clear that the government gives tax reliefs and expenditures adequate scrutiny to control their cost (noting that the combined £4bn annual cost of the ‘tied oils scheme’ and the ‘rebated rate for gas oil’ is more than the annual cost of running the department);
there is a lack of transparency around tax reliefs and expenditures, with little commentary on the numbers in HMRC’s annual data release;
the government does not seem to have a systematic way of evaluating the effectiveness of those tax reliefs and expenditures with a stated policy objective; and
tax reliefs and expenditures add complexity to the tax system, which may encourage more avoidance activity as taxpayers are given the opportunity to exploit new boundaries or to challenge legal interpretations.
The Office for Budget Responsibility (OBR) has included a section in its 2019 Fiscal risks report (see bit.ly/2LDqqaZ) highlighting the risks to public finances from the government’s inconsistent approach to monitoring the effectiveness of tax reliefs.
The report states that:
the government does not know the overall cost even of the tax reliefs and expenditures it can identify and only publishes the costs of around one in six of them;
the cost of policy-motivated tax expenditures HMRC has identified, approaching 8% of GDP, is large in absolute terms and by international standards;
it is not clear that the government gives tax reliefs and expenditures adequate scrutiny to control their cost (noting that the combined £4bn annual cost of the ‘tied oils scheme’ and the ‘rebated rate for gas oil’ is more than the annual cost of running the department);
there is a lack of transparency around tax reliefs and expenditures, with little commentary on the numbers in HMRC’s annual data release;
the government does not seem to have a systematic way of evaluating the effectiveness of those tax reliefs and expenditures with a stated policy objective; and
tax reliefs and expenditures add complexity to the tax system, which may encourage more avoidance activity as taxpayers are given the opportunity to exploit new boundaries or to challenge legal interpretations.
