Blaenau Gwent MP Nick Smith has called for an overhaul of the UK’s tax relief system, following a damning report by the Public Accounts Committee.
The report reveals how little evaluation has been undertaken of the tax breaks system despite it costing an estimated £159bn every year.
A report by the Public Accounts Committee – of which Mr Smith is a member – has revealed that despite many of these tax reliefs ultimately costing far more than originally forecasted, there is little understanding of whether they have succeeded or failed in their intended purpose.
Mr Smith said: “To put the £159bn a year into perspective, the Treasury puts the current cost of fighting Covid-19 at around £190bn.
“This is taxpayer money, and the sums are we are talking about here are huge.
“It is staggering just how little the Government knows about these very expensive tax reliefs.
“Tax reliefs must be properly assessed and analysed. The Government must evaluate who these breaks are benefitting and whether they are successful in their aims.”
Among the most expensive tax reliefs is on pensions, costing £38bn last year, but there have been no assessments of whether it truly works to encourage or enable saving.
Mr Smith said: “The hard data on who actually benefits from this relief is scant.
“What we do know is that Royal London has reported that 1.75 million low-paid or part-time workers do not receive any relief on their pensions and that three-quarters of these workers are women.
“It would be reasonable to suspect that those who benefit most from a tax relief on pensions are those who are already saving comfortably.”
The Public Accounts Committee has given the HMRC three months to set out plans to measure the efficacy of tax breaks.
It has given the Government a year to review whether pension tax reliefs succeed in achieving their intended purpose.
Mr Smith concluded: “By not comparing the real cost of tax reliefs to their original forecasts there is no feedback to inform future plans.
“It also means there is little accountability for escalating costs or instances of abuse.
“It is clear that the system is in desperate need of an overhaul.”

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