Most experts would agree that the tax system is hugely complex and in need of change. The Heath Robinson-style accretion of amendments and additions is precariously balanced on legislation that is over 50 years old (Taxes Management Act 1970), dating from a time when many current issues were purely science fiction.
The stated aim, to ‘improve taxpayer experience’, is admirable, although for most taxpayers this would be achieved by having the minimum direct contact with HMRC. The plans are ambitious - to go fully digital, obtain more information to pre-populate returns, reduce the risk of avoidance and have a flexible system which will cope with future needs and crises via a single gateway.
The HMRC consultation on this asks for comments on the stated plans and indicates that data from other jurisdictions will be examined to optimise the systems.
In planning these improvements, significant reliance is placed on the capacity to produce systems that are robust enough to offer all these benefits, yet have the flexibility to update for issues we cannot yet foresee. However, some potential problems are already apparent. The stated plans for the system to make rule-bending harder may also make it more difficult to adapt the system for people in unusual but entirely legitimate positions. In addition, taxpayers tend to trust HMRC and are likely to accept prepopulated figures, meaning HMRC errors are less likely to be spotted or challenged.
While the digitally excluded are mentioned in the document, it is not clear how they are to be protected and helped. As they are likely to be among our most vulnerable citizens, this is a real concern. Similarly, the concept of a single gateway to handle all Government issues is attractive, but we are already seeing problems with taxpayer identification in the current system. The new system must be able to deal with all types of taxpayers including trusts, estates and people, often the poorest, who lack the main conventional ID documents.
The report refers to HMRC being able to deal with future crises. While they have done a very good job with Coronavirus, the combination of this and Brexit has already stretched their resources very thinly. To expect HMRC to become a general crisis management system, on top of their regular duties, seems excessive.
This is a hugely ambitions project still in its infancy, and the system is in desperate need of reform. Let’s hope it will take into account unusual situations, rather than trying to apply a ‘one size fits all’ approach.