Danny Alexander has been forced to defend the UK’s tax policies in a grilling by MPs.
Treasury committee members sweated Mr Alexander on how the child benefits clampdown would place administrative and cost burdens on HM Revenue & Customs, which will handle the operation.
The Treasury’s chief secretary also fielded a barrage of questions from the committee, who demanded to know how the department was going to make the savings it was predicting through tax changes.
Tax advisers will have more work to do because Mr Alexander said there would be a requirement for people to make a declaration about their affairs on their tax returns and taxpayers who did not would face “penalties.”
Panel member Chuka Umunna branded the child benefits clampdown a “dog’s dinner” in terms of compliance burdens, an accusation which Mr Alexander strongly rejected.
“A lot of experts have questioned this in the sense that the taxation system will usually look at individuals and their earnings as opposed to a household or a couple?” said Mr Umunna.
“How are you going to keep tabs on this situation involving millions of couple households?”
Alexander said: “We will do so in the way we do so with the tax system as a whole is by having a requirement for higher rate taxpayers to make a declaration about their circumstances on their tax form and treating that appropriately.”
Alexander confirmed that HMRC had been involved “fully involved in the analysis of the decision to overhaul child benefit from the start”.
However Alexander swerved the question raised by committee chair Andrew Tyrie about whether HMRC lodged any reservations about the extra workload they were being asked to shoulder with the benefits changes.
Tyrie said: “Did [HMRC] warn you in advance of what is now perceived to be a considerable administrative difficulties?”
“I don’t think it’s fair to say there have been considerable administrative difficulties, Mr Alexander said.
“Certainly HMRC has been working to find the smoothest way to implement this change.”
The Treasury chief also said that the government’s corporation tax cuts could spur the private sector to fill the vacuum which will be left as the public sector shrinks.
This would be achieved by reducing corporation tax year on year and having lower tax rates for new business formation focussed in regions outside the South East.
“I think we have put in place a range of measures which will to help ensure that in those areas where public sector employment is currently highest we’re taking active steps to support the private sector create the jobs that we believe it can.”
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