Government struggles to simplify tax system, says ACCA

THE COALITION IS taking "two steps back for every one step forward" in simplifying the tax system, ACCA has said.

The institute's analysis of the coalition's first year in power identified five key tax decisions: raising the personal allowance; increasing VAT; corporation tax reforms; cutting HM Revenue & Customs' budget; and setting up the Office of Tax Simplification (OTS).

ACCA praised changes to the personal allowance scheme and described the corporation tax reforms as "bold". However, the VAT increase was called a "regressive" step, while the "underfunding" of HMRC was "one of the black marks against the government".

It said the establishment of the OTS was a positive move but said moves to simplify the system were undermined by the number of changes made since the government took power.

The institute compared the number of complications made by governments that had just won a general election. The analysis showed that there had been 110 changes in 2011 and 95 in 2010, which included changes made by Labour that the coalition decided to continue with. This compares with 115 in 2006, 126 in 2002, 90 in 1998 and 44 in 1997.

Chas Roy-Chowdhury, ACCA's head of taxation, said: "The Government is committed to simplifying the tax system, which is commendable, but so many changes in one year don't help matters. Hopefully more changes now mean fewer later. If government really wants to simplify the system it needs to avoid tinkering at the same time as simplifying."