Baku, February 10, AZERTAC

Britain’s “increasingly complex” tax system is costing businesses £15.4bn a year just to comply with, the public spending watchdog has warned, according to Telegraph.

Companies are paying at least £6.6bn per year on accountants, £4.3bn on internal administrative staff and £4.5bn on software and postage to satisfy increasingly difficult tax rules, according to a report by the National Audit Office (NAO).

The NAO said the figures were produced by HM Revenue & Customs and likely to be an underestimate. The watchdog said these “significant” costs were rarely considered when making decisions about tax.

The report also raised concerns about the rapidly rising cost of running the tax office itself. HMRC spending has risen by more than half a billion pounds since the pandemic alone, with an extra £100m spent on staff.

Extra spending has not led to better outcomes. Investment in digitising tax has been “mixed” at best and HMRC has found it “difficult to achieve efficiencies through its customer service provision”.

As a result, taxpayers are losing trust in HMRC as they find it harder to deal with, the NAO said.

Anna Leach, the chief economist at the Institute of Directors (IoD), said: “These costs have real-world implications: 48pc of IoD survey respondents said that investment was lower due to tax complexity and 23pc said innovation was lower.”

She called for HMRC to set measurable targets to reduce the administrative burden on its customers.

“It’s clear that HMRC has at best a patchy understanding of the cost it is imposing on taxpayers. Addressing this measurement gap is key,” Ms Leach said.

The report comes amid growing alarm about the bloated and growing public sector. The Bank of England last week blamed an increase in the size of the state for negative productivity growth last year.

The NAO’s findings will add to concerns about the growing burden on the private sector. Business leaders have expressed alarm about the Government’s decision to increase the burden on companies through a £25bn increase in employers’ National Insurance.

At the same time, Angela Rayner, the Deputy Prime Minister, is empowering unions and staff through an overhaul of workers’ rights. The Government’s own estimates suggest the workers’ rights changes could cost businesses as much as £5bn a year.

Darwin Friend, of the TaxPayers’ Alliance, said: “Britain’s tax system is already a maze of complexity and red tape, piling pressure on businesses.

“Yet instead of relief, Reeves is hitting them with a damaging jobs tax hike and the Employment Rights Bill – measures that will do more harm than good.

“The Government should not only scrap the National Insurance hike but go further and simplify our broken tax system to boost jobs and growth.”

The NAO’s findings are likely to reignite calls for the Government to copy Donald Trump by appointing an efficiency tsar with a private sector background. In the US, Elon Musk has been charged with slashing spending at organisations ranging from USAID to the Pentagon in his new role as head of the Department of Government Efficiency (Doge).

The world’s richest man has started offering voluntary redundancy to millions of US public sector staff in a ruthless efficiency drive, although his mass redundancy scheme was temporarily blocked by a judge on Friday.

Rachel Reeves, the Chancellor, has created an Office for Value of Money, which is intended to reduce wasteful spending. However, a report from a cross-party committee of MPs recently warned the office itself risked being a waste of taxpayer cash.

Increasing tax complexity, an increase in the number of people paying tax and higher staff investment led to a 15pc jump in the cost of the tax system between 2019-20 and 2023-34. The cost of running HMRC rose by £563m to £4.3bn.

Over the same period, the office collected £829bn in tax, a 16pc increase.

Stealth tax raids that began when Rishi Sunak was chancellor have combined with population and employment growth to swell the number of people who must pay income tax by 4.5m between 2020-21 and 2023-24, taking the total number to 36.2m.

Frank Haskew, of the Institute of Chartered Accountants in England and Wales (ICAEW), said: “The UK’s increasingly complicated tax system is saddling businesses and HMRC with extra burdens and costs, which are growing in real terms.”

The NAO called for HMRC to reduce the administrative burdens on taxpayers. Gareth Davies, the head of the NAO, said: “Businesses and individuals deserve a modern, resilient and effective tax system to help them get their tax right first time.

“To get the most out of the money it spends on collecting taxes, HMRC must better understand how changes to the system affect the costs it incurs in administering taxes, as well as the financial burden on individuals and businesses.”

An HMRC spokesman said: “It costs us just half a penny to collect every pound of tax revenue, with the NAO recognising our compliance work provides good value for money.

“We’re already improving and modernising the tax system to deliver the services our customers expect and slash red tape for business, and ongoing investment in our digital services will be vital to closing the tax gap yet further.”

The Government will announce a package of tax administration simplification this spring, which it has said will focus on reducing the burden for small businesses.