Treasury's new recruit admits system is too taxing

The new minister in charge of HM Revenue & Customs has admitted the corporate tax system needs simplifying.

Stephen Timms MP told an audience of tax experts at a CBI tax conference earlier this week that the challenge was how to implement simplification.

‘I accept we do need to simplify the tax system. The challenge is developing reform, delivering simplification and avoiding uncertainty,’ the recently appointed financial secretary to the treasury said.

The conference included a panel discussion between political party representatives where the only uniform agreement between the panellists was on the objectives of reforming the corporate tax system, namely in areas of clarity and transparency.

Timms conceded the government faces significant challenges in developing a more efficient system.

Philip Hammond MP, shadow chief secretary to the Treasury, said the problems were becoming worse.

‘We don’t know what we’re going to inherit… a big chunk of each finance bill seems to be correcting the mistakes of the previous two bills,’ he said.

In the ongoing fight against tax avoidance, Hammond said the government has introduced ‘complexity after complexity’.

The need for transparency and greater consultation between policymakers and business was a theme echoed throughout the conference.

The level of complexity and uncertainty are costs to business that have no corresponding benefit to the exchequer, Hammond said.

‘[Complexity] is simply a dead weight compliance cost to business only,’ he said.

Hammond added there needs to be ‘clear principles and philosophy behind the system and a clear sense of where administration is going’.

The need for consistency and clarity in the administration of the tax policy was backed by Richard Lambert, CBI director-general, who said imminent fiscal strains would further highlight questions already posed by business.

He said the government needs to set a clear strategy for the next ten years, including legislation, interaction between tax authorities and business, and a reduction in the headline rate over the revised period.