HM REVENUE & CUSTOMS must do more to monitor the impact of tax reliefs, with little currently known about effectiveness or unintended consequences, the National Audit Office said in a report.
The report identified more than 1,000 reliefs currently in place, and estimates the cost to the public purse stands at more than £101bn.
Some reliefs are designed to deliver specific policy objectives by providing behavioural incentives to achieve economic and social objectives. These are often an alternative to public expenditure, and have a similar effect.
But according to the NAO, monitoring arrangements for reliefs vary across HMRC, and few evaluations are commissioned.
HMRC was criticised by the Public Accounts Committee last year for undertaking “no proper evaluation” of the Gift Aid relief for charitable donations since its introduction in 2000. The NAO also added noted at the time neither the Treasury nor HMRC knew whether Gift Aid and other tax reliefs on donations have resulted in more income for charities.
Although this latest report describes the complete landscape of tax reliefs, the NAO intends to evaluate the administration of particular reliefs in work to be published later this year.
Head of the National Audit Office Amyas Morse said: “Tax reliefs are a powerful, important and long-standing element in our public finance system. However, their implementation is subject to less independent scrutiny that that of other instruments of public policy.
“The intention of this report is to put parliament in a position to consider whether the major elements in the management and responsiveness of the system of tax reliefs are working adequately or are in need of further attention.”
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