Why is it so hard to successfully implement tax policy?
Andrew Hubbard

Written by:

Andrew Hubbard

Consultant

Why is it so hard to successfully implement tax policy?

It is unrealistic to think that tax can ever be simple – but as a country we seem to have an inbuilt bias towards creating complex answers to simple questions. Here are three recent examples.

The government wanted to give couples a £1m Inheritance Tax allowance between them but instead created a back-door way of doing the same thing by introducing an additional allowance for residential property. This produced legislation of mind-boggling complexity which required HMRC to produce a guidance note with the less than comforting comment: ‘The downsizing rules are complicated. This guide explains the basic rules, but it can’t cover the more complex situations’.

Secondly there are the income tax exemptions for small amounts of interest and dividend income. On the face of it these are sensible simplifications but the way that they have been enacted is far from straightforward. It doesn’t help that the two exemptions operate in quite different ways. The consequence is that HMRC’s tax return software can’t cope with the interaction of the various exemptions, with the result that huge numbers of people have been unable to submit online returns and been forced to send in old-fashioned paper returns.

Thirdly there is the new regime for 30 hours of free childcare. Again the policy seems straightforward but the implementation anything but. Amid reports of thousands of people being unable to access the website to register HMRC has been forced to introduce a compensation scheme for those who missed out on benefits because of registration problems.

Why do we keep getting into these difficulties? We seem unable to bridge the gap between policy and implementation. I’ve always thought that it should be compulsory that policy proposals are only signed off when the forms necessary to implement them have been designed and approved.

Perhaps we should go further and make it a requirement that the IT systems to deliver the policy should also be designed and approved before implementation. Perhaps I am behind the times and this already happens …but if it does I’m not convinced that the process is working!

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