The UK taxation system is over-complicated
The UK taxation system is over-complicated, the government says
The “spaghetti bowl” of UK tax law is to be simplified to cut the burden on business and attract foreign investment, George Osborne has said.
The chancellor is setting up an Office for Tax Simplification to streamline the 11,000 page tax code.
He said Britain had “one of the most complex and opaque tax codes in the world”.
And he wanted a “permanent body to push against the forces of complication” and make life easier for firms.
Announcing the new body, Mr Osborne said his “dream” was “that people might actually understand the tax laws with which they were being asked to comply with”.
The new body will initially conduct two reviews – streamlining 400 tax reliefs, allowances and exemptions and simplifying the tax system for small businesses, including a simpler alternative to the controversial IR35 code.
It will advise ministers where the tax system is too complex but it will not look at tax credits, which Mr Osborne said he considered part of the benefits system.
The chairman of the new body will be former Conservative MP and Treasury minister Michael Jack and its director will be John Whiting, formerly of PricewaterhouseCoopers, who is tax director at the Chartered Institute of Taxation. Neither will be paid.
The government says the tax system became a “hindrance” to business under Labour and that by simplifying it and making it more competitive for small firms, it will stimulate economic growth.
In a speech, Treasury minister David Gauke said: “The tax system created by the previous government was overly complex and has made the tax affairs of millions of families and businesses across the UK extremely complicated.
“We need to reduce the complexities in our tax system and the coalition is committed to delivering that goal.
“The Office for Tax Simplification will provide important advice that will help inform us in making the right reforms to the tax system that will help to pave the way to bringing more international business to the UK, which will give our economy the boost it so urgently needs in the years ahead.”
The OTS’s remit covers UK taxes and duties administered by HM Revenue and Customs, but it will not deal with tax credits or taxes administered by other bodies nor will it have any influence on setting tax rates.
In his first Budget last month, George Osborne set out plans to reduce the headline rate of corporation tax by 28% to 24% over four years in an effort to show Britain was “open for business”.
But this will be partly paid for by cuts in capital allowances, which provide tax breaks to firms investing substantially in operational assets such as machinery. Critics say this will penalise small and medium-sized manufacturing firms.
In May the government set up the Office for Budget Responsibility, to provide the government with independent forecasts of UK economic growth and public deficits.
Just another instance of a Government giving with one hand, only to take back with the other!
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