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Watchdog demands overhaul of UK tax breaks

20th July 2020

The Public Accounts Committee (PAC) has today published a report calling for a review of tax reliefs in the UK on the grounds that few deliver the "intended effect on economic behaviour".

It says that the ten most expensive tax reliefs cost £117 billion per year but that only a quarter of those costing more than £1bn per year actually deliver the expected results.

The Committee singled out pensions relief for particular attention. It cost £38bn in 2018/19 but, the PAC says, there is no evidence that this encouraged people to save for their retirement or that it reduced dependency on the state pension system.

Entrepreneurs' relief and VAT relief for the construction of new homes were also highlighted as examples of policies sometimes regarded as benefitting primarily those who are already relatively wealthy.

As a first step towards assessing the effectiveness of tax reliefs, the PAC wants the Treasury to produce a comprehensive list of each one with notes on what they are supposed to achieve.

Meg Hillier, chair of the PAC, said:

"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. It's all still taxpayer's money and the Government must account for it."

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