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Making tax policy – why analysis matters

Making tax policy – why analysis matters. Mark Neale Managing Director Budget, Tax, Welfare HM Treasury. Objectives of HMT’s tax policy function…. We’re not only here for the money. HM Treasury is both a finance & economics ministry. Our objectives reflect that:

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Making tax policy – why analysis matters

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  1. Making tax policy – why analysis matters Mark Neale Managing Director Budget, Tax, Welfare HM Treasury

  2. Objectives of HMT’s tax policy function…. We’re not only here for the money HM Treasury is both a finance & economics ministry. Our objectives reflect that: • To raise revenue within the overall fiscal policy framework, to manage risks to those revenues and to analyse longer-term sustainability • To improve the efficiency and fairness of the tax system • To improve citizens’ incentives and opportunities to work, to save and to support children

  3. Raising revenue …. understanding and managing risks & opportunities Revenue flows are affected by a wide range of macro-economic, micro-economic and operational factors. Key challenges and issues for the policy-maker include: • Horizon-scanning – to identify the implications for revenues of long-term trends such as globalisation,demographic change and shifts in public attitudes • Short-term risk management, including, in partnership with HMRC, of tax avoidance and evasion • Understanding the potential and limitations of new analytical tools such as dynamic scoring

  4. Improving fairness and efficiency ……tax without tears Tax reforms can have important economic and distributional implications. So we aim to analyse: • The economic costs of different tax bases • The potential for tax to correct market failure • The distributional consequences of tax changes – the Interdepartmental Tax Benefit Model

  5. Improving incentives We use the tax & welfare systems to affect individual decisions to work, save and invest. So we take a close interest in: • Behavioural economics – new insights or a pretext for economic tinkering? • Labour supply models • Diversity impacts

  6. So where do we stand? Together with our partners in HMRC, we are the main source of advice to Ministers on tax & welfare issues. So our professionalism and the quality & range of our analysis matter. • We must be open to new techniques & insights while maintaining excellence in traditional approaches • We must collaborate with the best of the outside world and prepare to challenge and be challenged • We must be able to analyse long-term issues, while providing robust and credible advice to tight timescales

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