The OTS complexity index

Finance Act 2012Today the OTS publishes a proposed methodology for a tax complexity ‘index’. A paper setting out the methodology can be found below:

OTS Complexity index methodology paper

The aim of the index is:

  • To provide an indication of which areas of tax legislation are considered to be particularly complex compared to others;
  • To develop a tool that will help to prioritise the future work of the OTS; and
  • In the long term, possibly to provide tax policy makers with a methodology to help avoid unnecessary complexity in future and to help prioritise areas for future tax simplification.

To construct the index we have identified seven key criteria which influence the complexity of tax legislation. By scoring each of these criteria out of 5 and the weighting thee scores the methodology gives a complexity index score out of 10. This relative score can be used to rank all of the tax legislation by degree of complexity.

The seven criteria we have used are:

  • Legislative complexity;
  • HMRC guidance complexity;
  • Number of taxpayers impacted by the legislation;
  • Average ability of taxpayers involved in the area;
  • Avoidance risk;
  • Cost of compliance; and
  • HMRC operating costs.

The methodology is intended to spark a debate about what complexity is and how we measure it. We welcome comments and views on the index, especially whether we have included the right measures or if you feel there are others we could add.

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