Taxation reform: Osborne bids to break up 'spaghetti bowl' taxes

The Government hopes to unravel the "complicated and opaque" process by creating a new Office for Tax Simplification (OTS).

The OTS will have the task of making the 11,000-page tax code both

shorter and simpler for individuals and companies to negotiate. The plan was welcomed by the Institute of Directors and the British Chambers of Commerce.

Mr Osborne said: "We have one of the most complicated and opaque tax codes in the developed world – it's got more complicated and more opaque in the last 10 years.

"It is a spaghetti bowl of reliefs, exemptions and allowances which makes our tax system less competitive that it should be.

"I want to create a simpler tax code, a more competitive tax code which says to the world that Britain is open for business."

Michael Jack, who served as financial secretary to the Treasury in John Major's government, and John Whiting, a former tax partner at Price

waterhouseCoopers, have been appointed as an unpaid two-man board, based in the Treasury, for the next 12 months.

They will be able to draw on expert advice from tax lawyers and consultants and support from Treasury officials.

The OTS will write two reports for the Chancellor, on tax reliefs this autumn and on business taxes ahead of the spring 2011 Budget. The first reviews will begin in early September.

Tax lawyer Robert Macro said the new system would not provide any "overnight miracles" in terms of cuts. A partner at Dawsons LLP, Mr Macro said: "The UK tax system is fit to bursting.

"This new body will certainly help trim the fat around the edges but it won't make Britain a low tax jurisdiction.

"According to HM Revenue and Customs figures, the Government's share of what we earn nearly doubled under the previous Labour regime.

"High earners have been especially hit, with rises to the rate of income tax, capital gains tax and National Insurance contributions. Our clients aren't expecting a miracle overnight in terms of tax reductions.

"All that we can ask for is consistency of approach, a simplification of tax laws and anti-avoidance rules, and an end to surprise legislation without consultation between HMRC and the professional bodies."

The Trades Union Congress said it was concerned the office could become a "softening-up exercise for tax cuts for the rich".

But the launch was welcomed by business chiefs.

Richard Baron, of the Institute of Directors, said it was "a brilliant idea". "But we have to see results. Good reports will not constitute results. Legislation in finance bills will."

Director-general of the British Chambers of Commerce David Frost said: "The creation of the OTS is a necessary and long overdue response to the relentless chop and change of tax law."