MS: Offices for Tax Avoidance Policy and Simplification

[Katherine West]

Mr Speaker,

With your leave I will make a brief statement.

As the House will know, the Government has made it clear that it intends to reduce waste and the cost of Government to ensure that there is more money for frontline public services and that the tax people pay is spent fairly and is as low as possible.

But we also need to take action on the other side of the equation. HMRC’s latest evidence is that the tax gap last year stood at £33 billion. Some of that can be solved by improved enforcement activity by HMRC, which is why we have provided further investment this year through the Budget, and will be receptive to other so-called “spend-to-raise” proposals that invest in HMRC resources to chase down tax evasion behaviour.

However, legislative change is also important. Tax is complex. Putting it into practice often leaves us with gaps that so-called well-advised individuals will slip through. That often means that the very richest of the individuals or their corporations do not pay their fair share. In the big society, there is no room for this kind of dereliction of duty to one another. People and corporations should pay the taxes that support the most vulnerable, educate our children, and fund the NHS. There are no exceptions to that expectation.

I want us to close more of those gaps more quickly, and reduce the likelihood of new or existing tax law having those gaps or loopholes. So today I am announcing that as part of HMRC’s funding increase in the Budget, they will establish two new units across HM Treasury and HM Revenue and Customs.

The first of those units will be the Office for Tax Avoidance Policy. Its role shall be to work between budgets to recommend to the Chancellor of the day cross-cutting packages of policy or legislative changes to reduce tax avoidance. At the moment, policy is driven within silos, with no sense across departments of where the most important areas for us to devote resources towards implementing change is. This cross-cutting unit will set a more strategic direction, and will have an explicit Ministerial mandate to do so. That mandate will come in the form of annual targets for revenue raised through its recommendations. The Chancellor will set those targets annually at the Budget.

The second of these units will be a new Office for Tax Simplification. Its role will be to review existing and upcoming tax legislation with a view to recommending steps to remove complexity and inconsistency. This serves two purposes: it can pre-empt many of the gaps and loopholes that may become future tax avoidance arrangements. But it can also reduce compliance costs on small businesses, unleashing higher productivity and wages in the economy.

I have initially budgeted £3.5 million for the OTAP and £1.5 million for the OTS in startup costs, with ongoing costs likely to be significantly lower.

We are all familiar with HMRC’s mantra that tax doesn’t have to be taxing. For some wealthier people or corporations, that is truer than it ought to be; and for many smaller businesses it simply isn’t at all. These new initiatives will plot a course towards changing that, and I commend them to this House.