Following the publication of the OTS complexity index methodology we have received several responses which the authors have kindly allowed us to reproduce here. We are very pleased that the index has helped spark debate and as we look to refine the methodology over the coming months we welcome further views on our approach. Please email us at firstname.lastname@example.org if you would like to contribute.
The first response is from Professor David Ulph of St. Andrews University and a former head of HMRC’s analysis unit. His paper provides an excellent discussion on the concept of complexity and how to measure it. Professor Ulph also provides a useful critique of the OTS methodology which we will be looking to refine over the coming months.
The second response is from Richard Baron of the Institute of Directors (IoD). Richard gives a critique of the criteria in our index and raises some interesting questions about the validity of several of them. Richard also comments on our weighting methodology and whether these should be subjective, arguing that they should not. He also questions whether we could ever get to a ‘robust’ measure of complexity and whether we should really only use the index to spark and stimulate debate.
The third response is from one of the members of our Consultative Committee for the Employee share schemes review, David Pett of Pett, Franklin and Co. David’s argument is that simplifications that level the playing field for smaller taxpayers should be given more weight, even if they increase the length of legislation. Larger taxpayers shouldn’t benefit from the tax system just because of their size and ability to pay for better advice.
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:
HMRC guidance complexity;
Number of taxpayers impacted by the legislation;
Average ability of taxpayers involved in the area;
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.