Complexity or simplification? That is the question.

HAS the government forgotten its agenda to simplify taxes? A read through the Institute for Fiscal Studies’ (IFS) Green Budget report this morning could easilly lead you to conclude that. Which is ironic given one of George Osborn’e first acts as chancellor was to set up the Office for Tax Simplification (OTS).

The IFS report looked at many things, among them the government’s approach to corporate taxes and intellectual property. It’s conclusion is that if all the government’s proposals proceed as planned we will have a “system with significant additional complexity”. Ouch. That’s not what business or advisers want to hear. And it’s certainly not a view the Lib Dem and Tory ministers at the Treasury want to hear.

To be fair, tax policy is not easy. The previous government came a cropper on more than one occassion after making exorbitant claims for new tax policies that were later proved wrong.

But according to the IFS, the government has misjudged in a number of areas. Not least on the small business tax. In short the IFS says that small business tax would be better going up than being cut to 20% in April this year.

That will come as a surprise to many but the bigger point is that tax is part of a set policies that the IFS sees as undermining the tax system, not improving it.

The government will need to take care as they head into next month’s Budget that it’s drive to improve things doesn’t make things worse. The risk of unintended, or unwanted, consequences is well documented. The state of the economy is too precarious to inadvertently make things worse through what would otherwise be innocuous tax policies.



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