Chancellor “very grateful” to OTS but backs decision to abolish body

In a letter to Harriett Baldwin, chair of the Treasury Select Committee, the Chancellor said he was “very grateful” for the work carried out by the OTS, which was established in 2010, but that he had not reversed  Kwasi Kwarteng’s decision to close the office in order to allow the simplification of tax policy making to be brought in-house to the Treasury and HMRC.

He said when making decisions on tax policy, the government must consider objectives such as raising revenue, incentivising behaviour, or tackling avoidance and evasion, factors which were often outside the remit of the OTS.

Mr Hunt said: “The OTS was established to provide independent advice to the government on tax simplification. I am very grateful for its advice and contributions to the debate on tax. However, by virtue of being an independent body of the Treasury the OTS was not always able to weigh up the competing, legitimate objectives and priorities for tax policy that Ministers take into consideration, including delivery, fairness, impact on business and individuals, and costs to taxpayers.

“It is right to ensure that simplicity of policy and administrative design is brought more directly into policy making in the Treasury and HMRC, with my close oversight, supported by the Financial Secretary.”

Mr Hunt added that tax simplification remains a “key objective” and the closure of the OTS does not mean that simplifying tax is “no longer a priority, or that the job is done”. He continued: “Rather, following the closure of the OTS officials in the Treasury and HMRC have been given a clear mandate to focus on simplicity in tax policy design.”

Mr Hunt praised the OTS’s role in engaging with a wide range of stakeholders, something he said the Government would continue to do.

He added that several of his announcements at last month’s Budget were “the first steps on this journey”, including a consultation to expand the cash basis, investing in improving HMRC guidance and key forms for small businesses and improving agent access to enable businesses’ agents to payroll benefits in-kind on behalf of employers.

Last week,  the Chartered Institute of Taxation (CIOT), Association of Taxation Technicians (ATT), Institute of Chartered Accountants in England and Wales (ICAEW), ICAS (Institute of Chartered Accountants of Scotland) and the CIOT’s Low Incomes Tax Reform Group (LITRG) wrote to the Financial Secretary to the Treasury (tax minister), Victoria Atkins , expressing their regret at the government’s decision to abolish the OTS. They proposed a series of actions ministers and officials should take if they are serious about delivering a simpler tax system.

The bodies welcomed the Chancellor’s assurance that simplifying tax remains a priority and that officials in the Treasury and HMRC have been given a mandate to focus on simplicity in tax policy and administrative design, while also offering their support to help Treasury and HMRC officials achieve simplification.

Read the full letter here.