Alex Wild, Research Director at the TaxPayer’s Alliance, is the latest expert to highlight the impracticality of the British tax relief system. Many feel he has a point when he says, “How can HMRC be expected to administer Britain’s chaotic tax system if politicians keep passing so much legislation?” But there’s much more than an interesting point at stake here.

HMRC hoist by their own petard

Apparently even HMRC themselves are finding it a challenge to keep the system running smoothly, and its increasing complexities are only making things worse. It’s no real surprise when George Osborne’s Finance Bill for 2013 alone ran to an exhausting 646 pages… and while only five Finance Acts have ever run to more than 600 pages, the current coalition is responsible for three of them. It looks like Mr Osborne’s talk of a simpler tax system is exactly that: all talk and no action, all mouth and no trousers.

It’s bad enough that HMRC themselves find their own system a nightmare to run. Imagine what it’s like for ordinary self employed people and small companies?  As Alex Wild says:

                “The problem is that administrating this mess is a daunting task. Earlier this year, the Public Accounts Committee said the Treasury and HMRC are unable to cope with the demands of managing the ever-growing list of tax reliefs. The Office of Tax Simplification (OTS) currently lists 1,140 on its website and next week’s Autumn Statement could well add to that number. While an OTS report led to the abolition of 43 reliefs in 2011, 134 more have been added since.

VAT reliefs are potentially the most difficult to tackle politically. The government would struggle to justify ending the zero-rating for VAT on supplies to build new homes, given the exorbitant cost of  housing, even if it did raise the extra £8bn HMRC says it would. Others are downright daft – why is no VAT levied on cream gateaux but 20 per cent is levied on ice cream gateaux?”

The National Audit Office’s report into HMRC’s tax relief management is damning, labelled “inconsistent and fragmented” and claiming the tax man is unacceptably slow to react to abuses of the system. Talk about being hoist by your own petard!

Can the 2020 Tax Commission fix it? Only if politicians butt out

On the bright side, the 2020 Tax Commission has suggested a simpler, flatter system. Let’s hope Britain moves towards it instead of making the existing system ever-more complex. It’s about time politicians stopped churning out so much legislation, which urely isn’t the only way to make the system work better.

What do you think? Feel free to comment!