The Institute for Government, a think tank, has stated that the UK lags behind global standards when it comes to evaluating its tax reliefs, despite having one of the highest costs for reliefs. In light of this, the think tank suggests that the government should conduct a review of individual tax reliefs every five years and eliminate those that no longer serve their intended purpose or are susceptible to misuse.
Harriett Baldwin MP, chair of the Treasury Committee, acknowledges that the current tax system in the UK is overly complicated, with numerous un-costed tax breaks only adding to the complexity. While some reliefs are effective, others become targets for abuse or remain unused, contributing to the ever-expanding tax code. Baldwin emphasizes the urgent need for costings on all reliefs, rather than just a third of them, and calls for better collaboration between HMRC and the Treasury to address the complexity, lack of transparency, and potential for abuse.
The committee also highlights the influence of lobbying groups on the introduction of new tax breaks and the resistance to removing existing ones. They urge the government to resist such pressure and make decisions based on the overall effectiveness and fairness of the tax system.
In response, a government spokesman defends the importance of tax reliefs in promoting fairness and economic growth. The government emphasizes its commitment to keeping the tax system simple, exemplified by recent reforms and cracking down on tax relief fraud through increased staffing in R&D compliance.
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