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PAC urges government to assess tax reliefs for effectiveness

21 Jul 2020

The Public Accounts Committee (PAC) has called on the government to assess how effective tax reliefs are and whether they achieve their intended objectives.

In a new report, the PAC said that the government 'knows too little about the tax reliefs it provides', including whether they work or offer value for money. The PAC found that the ten most expensive tax reliefs cost the public purse £117 billion per year, which is equivalent to giving up around 5% of GDP in foregone tax revenues.

The most expensive reliefs, pension reliefs, cost an estimated £38 billion in 2018/19. In the 2020 Budget Chancellor Rishi Sunak announced that he was reforming Entrepreneurs' Relief on the basis that the relief was expensive, ineffective and unfair. The relief cost over £2 billion a year and nearly three quarters of the cost benefited just 5,000 individuals.

The Committee has called for the government to outline clearly the range of UK tax reliefs with their intended objectives so that proper assessment can begin on whether the reliefs achieve what they're meant to achieve.

Commenting on the issue, Meg Hillier, Chair of the PAC, said: 'Every Budget we get tax breaks announced like baubles hung on a tree and they generate great headlines, but the truth is the government has little clue about the value of an enormous cost to the public purse.

'Tax breaks are not freebies – they cost the public purse hundreds of billions of pounds in lost income. The government must know who they benefit and to what end.'

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