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Tax reliefs are a substantial, complex and poorly managed element of the tax system. HM Treasury and HM Revenue & Customs (the Departments) are accountable to Parliament for providing timely feedback on what reliefs cost, and whether they deliver Parliament's intent. Complexity in the tax system is a longstanding issue, but the Departments appear not to have been able to cope with the growing demands of managing increasing numbers of tax reliefs. They are uncertain about the scale and value of different types of relief—including which reliefs should be treated as "tax expenditures" (reliefs to encourage behavioural change). The tax expenditures in the UK tax system are estimated to cost over £100 billion per annum. With the breadth, number and tax complexity of reliefs HMRC cannot be fully vigilant and knowledgeable about the cost and value of reliefs. The case of film tax relief highlights how a minor, but poorly designed, relief eventually cost the exchequer over £2 billion. The Departments were slow to respond and did not bring the surge in costs to the attention of Parliament. We look to the Departments to set out clear proposals on how to improve the management and accountability to Parliament of the cost and performance of tax reliefs.
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