Simplification, the importance of collaboration and digitalisation are some of the themes that emerged from a discussion on the future of a tax administration authority, as part of a joint ICAEW and Chartered Institute of Taxation (CIOT) event to mark 20 years of HMRC that took place at Chartered Accountants’ Hall this week.

An illustrious panel of experts looked ahead to some of the big changes ahead and challenges and opportunities for transforming the UK’s tax administration system. 

They included James Murray MP, Exchequer Secretary to HM Treasury; Paul Aplin, a former ICAEW president, now vice president of CIOT; Amanda Tickel, Head of Tax and Trade Policy for Deloitte UK; and Dame Meg Hillier MP, former Chair of the Public Accounts Committee and current chair of the Treasury Select Committee. The panel was hosted by ICAEW Managing Director of Reputation and Influence Iain Wright in front of a packed audience in ICAEW’s Great Hall. 

Simplification

The need for simplification of the tax system dominated the discussion, but the complexity of the task in hand was not to be underestimated, panellists cautioned, with Hillier warning of the need for continuity and consistency. “That’s the challenge,” she warned. “You’d have to have some consistent approach cross-party to simplify tax.” 

Murray argued that a dual-pronged approach is needed, one that tackles both tax policy and tax administration. “It is incumbent on us to make sure that any regulations coming down the line you’re always thinking: ‘Am I minimising the burden on businesses?’” 

In addition to tackling the complexity of tax legislation, the focus also needed to be on simplifying the user experience, Aplin agreed. “I’d like the lived experience of tax to become as important in policy design as data analytics.”

Murray said there were no plans to introduce a similar independent body to the Office of Tax Simplification (OTS), which closed following an announcement in the September 2022 Budget, but the focus on simplification was alive and well. 

As a former OTS board member, Aplin said it did a good job of opening conversations and giving people a trusted forum to express opinions. “People felt they could be open because they were one step removed from the Treasury or HMRC. I don’t think those conversations really take place in quite the same way with quite the same quality.”

He said new approaches to simplification are needed. “Most of the time we were restricted to looking at stuff that already had a problem. Every time we tried to get upstream, we were told that you’re getting very close to policy and politics, and you can’t go there. I think we’ve got to get over that. 

“Changing the wheel when you’ve got a burst tyre is one thing. Designing a tyre that isn’t going to burst is a much better place to be,” Aplin added.

Digitalisation

Digitalisation could transform the tax system, but it’s not a magic wand, Aplin said. He pointed to the example of Making Tax Digital (MTD) as a case in point. “The thing that keeps me awake and excited is the potential MTD gives us for building prompts and nudges into software technology to help people avoid making mistakes at the point of transaction. That’s where I think the money is, not in quarterly reporting. 

“If we make the experience of dealing with your tax simpler, people are more likely to voluntarily comply. And our whole system depends on voluntary compliance. So, using technology in ways that people actually want to use to help them have a better experience is really important,” he added.

But digitalising existing ways of working were a missed opportunity, Hillier said. “It’s about transforming the processes and not digitalising existing processes.”

Collaboration

What emerged from breakout sessions with conference delegates was the need for more collaborative working between HMT, HMRC and the professional bodies to successfully develop tax policy that works – a point unanimously agreed with by panellists. “Collaboration is everything if you want to get things right,” Aplin said. 

Murray said the nature of tax administration is how it works in practice and how people interact with the system. But there is also much HMRC can learn from other sectors in terms of the way people interact with services, he said. 

International comparisons

At the same time, we should also look abroad to see how other countries are tackling the challenges, Hillier said. As a former Chair of the Commonwealth Association of Public Accounts Committees, she said the ability to have conversations with those in other countries about their experiences is invaluable, otherwise the result can be that systems are too inwardly focused. 

Tickel said it’s important for us as a country to see what others have done. “Why reinvent the wheel?” she said. “There is some fascinating stuff going on out there, but I think it would be a mistake to think that other countries are all doing better than we are in the UK.” 

Panellists pointed to the examples of the US and its use of artificial intelligence (AI) to collect tax and detect fraud, and Finland’s use of enterprise resource planning (ERP) and electronic point of sale (EPOS) systems for pre-populating tax data. “There’s some really good stuff going on in other tax authorities, but there isn’t a Nirvana that matches the UK,” Tickel warned.

Aplin called for information and knowledge exchanges “not just at a policy or strategic level, but also exchanges at whole face level, with international colleagues. Everybody’s got their successes and failures.”

He said the cumulative effect of lots of small things can be enormous, but a common identifier is absolutely critical. “As a citizen, I don’t want to deal with HMRC and numerous other government departments. I want to deal with government and if I’ve got a single identifier, that enables me to do that in a simple, seamless way. You can’t really go too far down the pre-population road until you’ve got that identifier, but Denmark’s been doing it since 1988. This is old technology.”

Communicating purpose

Panellists also suggested that better communication of the purpose behind tax policies could help to reduce the number of tax cases. That requires proper planning so that policies can be stress tested, Hillier said. Instead, there is a tendency to push out announcements because ministers want something to say. “Not being afraid to talk about the pitfalls and problems before you announce the policy is one of the key things that you need to do.”

Murray stressed the importance of having an overall roadmap on tax, but there needs to be flex in the system. “We want to test and learn ideas as we get there, but that way all of the individual policies fit into an overall route. You know exactly why you’re doing different policy measures so that they have a coherence and they’re more than the sum of their parts.”

Artificial intelligence

Generative AI offers huge potential to transform the way that HMRC could work. Indeed, Hillier described AI as a real opportunity, against a backdrop of the debate about the advice guidance boundary. “It could open up a lot of opportunities for the public because they can’t afford to pay for advice. But you’ve got to have the right source material.”

Murray said the government was exploring use of GenAI to help direct people to the right advice on the government website to relieve pressure on HMRC helplines, but big questions remained. “How can we get to a position where people could ask a question through GenAI and get that same level of reassurance as they do from ringing an HMRC phoneline. What role does it play in terms of providing that reassurance and maintaining people’s trust in the tax system?”