Tuesday, 20 July 2010

Negotiations and love songs: why simplification and deregulation never happens

I am quite a big fan of music; I have over 30,000 songs on my ipod and I must be one of the few people who wishes that they made ipods with bigger capacity than 160GB. My taste in music is quite iffy, but one artist who I'm not at all ashamed to admit that I like is Paul Simon. One of his songs contains the lyric: "negotiations and love songs are often mistaken for one and the same". What did he mean by this?

Well, as so often with Paul Simon, he was making a subtle point. There are a few romantic songs that have lyrics along the lines of "I love you, you love me, oh how happy we shall be", but they are in fact a distinct minority. Far more romantic songs have lyrics along the theme of "if you come back to me I swear that I shall treat you better and generally be a nicer person in any number of ways that are not easily encapsulated in a three minute song". These are not love songs, but negotiations.

In just the same way, simplification and deregulation are misunderstood. Which is why my heart sank when I heard today that the coalition is setting up the Office for Tax Simplification. This is doomed to disappointment.

Different people mean different things by simplification. The general public hear this as "tax cut" or "eliminating an unfair anomaly". The taxman hears this as "closing a loophole". The tax professional hears this as "an easier life". These three things are directly in conflict.

Moreover, people will often use the terms simplification and deregulation interchangeably. That doesn't help either. Some deregulation can be very complex. For example, a flat tax is very simple. But most people would welcome the complexity that comes with various reliefs, allowances and exemptions.

The plain truth is that while most people claim to want simplicity, they are quite prepared to put up with a lot of complexity if they can benefit from it. This is particularly true of large corporations and wealthy individuals, who will see complex tax schemes as a big plus. There are powerful vested interests in maintaining complexity.

Finally, it should not be overlooked that every line of legislation was inserted with a policy objective in mind. It may be that policy objective was not met by the legislation or it may have been superseded, but it is more likely that the policy point is still extant and that there is a cost as well as a benefit from repealing or simplifying it.

All of which leads me to predict right now that the Office for Tax Simplification will be a damp squib. It will tinker round the edges, but I expect the tax legislation to be lengthier in 2014 than it is today.



Plato said...

I think you are being too cynical AF, your points are well made but I can't believe that the extra few thousand pages of tax regs introduced since 97 represent a bulwark we can't roll back from.

I'm no numpty but even SA forms are a nightmare these days for someone like me who has a handful of shares/inherited a teeny annuity and earned both as SE and as a dir of own business.

Back in 97 it was a 10 minute job to fill it in - no longer...

JonathanD said...

The OTS terms of reference include this as their immediate aim

"The Government is particularly interested in identifying those reliefs that:

are largely historic or have a policy rationale that has weakened over time;

are not frequently used;

benefit a small number of taxpayers but may create distortions in the tax system; or

are used by larger number of taxpayers but that are complex for business and/or HMRC to administer."

As you say, progress may be very small, although the relatively limited priorities above suggest some success is possible.

As their role is only to advise, greater tax simplification will only come if there is the political will to make big changes in the tax system.