The Chartered Institute of Taxation (CIOT) is urging new Chancellor Rishi Sunak to do more to monitor and evaluate £155bn a year of the UK’s tax reliefs.

This follows the publication today of a report by the National Audit Office (NAO) examining the effectiveness of how the Treasury and HMRC use their resources with regards to tax expenditures.

Tax expenditures mean non-structural tax reliefs where government opts to forego tax in order to pursue social or economic objectives, such as tax credits for companies’ R&D costs and income tax relief on pensions contributions.

CIOT tax policy director John Cullinane said: “We strongly welcome the NAO’s intervention in the debate about the effectiveness of tax reliefs and support its recommendations. We hope the new Chancellor takes heed of the NAO’s concerns, which are similar to those expressed in our Better Budgets report which called for proper and systematic review of tax changes including the growth in tax reliefs.

“HMRC’s monitoring of tax reliefs is not yet systematic or proportionate to their value or the risks they carry. There is a mismatch between the significant effort in government – and to an extent Parliament – that rightly goes into new tax measures, and the relative lack of attention to how effective those measures have been. This is particularly the case with tax expenditures, which do not usually get the NAO scrutiny that traditional government spending does. Taxpayers deserve better, especially when the sum of the estimated costs of tax expenditures in 2018-19 was £155bn."

The 2017 Better Budgets report – produced by CIOT in partnership with the Institute for Government and the Institute for Fiscal Studies – called on the Government to institutionalise evaluation of tax measures – that is provide for systematic post-legislative review of whether measures are achieving their objectives at an acceptable cost, with Parliament holding government to account for this. The report acknowledged that the political and technical nature of much of tax policy can inhibit effective upfront scrutiny. That places more weight on the importance of effective evaluation, but at the moment this is poorly done. The report identified a particular need for more effective evaluation of tax expenditures.

Cullinane continued: “Neither the Treasury nor HMRC keep track systematically of tax reliefs intended to change behaviour, or adequately report to Parliament and the public on whether tax reliefs are expensive or even work as expected. Departments generally do not test whether their aims for the reliefs are being achieved.

“Unless they monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, HMRC and the Treasury’s administration of tax reliefs cannot be assumed to be value for money.

“We hope the Public Accounts Committee, once it is up and running in this Parliament, will take up this important issue.”

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