Osborne tackles "spaghetti bowl" tax code

LONDON (Reuters) - Chancellor George Osborne launched an Office for Tax Simplification on Tuesday with the object of providing the Treasury the best options for unravelling "a spaghetti bowl" of complex laws.

The OTS will not set tax policy but is rather about creating internal institutional pressure to simplify the tax system, Treasury officials said of the latest move by the Conservative/Liberal Democrat coalition government which came to power in May.

"The previous government took a complex tax system and made it even worse. A decade of meddling and intervening has made the tax affairs of millions of families and and businesses across the UK extremely complicated," Osborne said at the launch.

"It is a spaghetti bowl of reliefs and allowances," he said. I hold out for a dream, a distant dream, that people actually understand the laws they are being asked to comply with."

Michael Jack, a former Conservative Treasury minister, will head up the body initially. John Whiting, formerly of PricewaterhouseCoopers and most recently at the Chartered Institute of Taxation, will act as director.

The body will be based in the Treasury and be staffed with a secretariat of civil servants and private sector secondees.

It will initially focus on reviewing the 400 or so reliefs in the tax system and simplifying taxes for small businesses.

Business welcomed the creation of the body but said that it had to prove its independence from government

"This new Office of Tax Simplification is a brilliant idea, and we congratulate the government for getting a move-on and setting it up so soon after coming to office. But we have to see results. Good reports will not constitute results. Legislation in finance bills will," said Richard Baron, head of taxation at the Institute of Directors, a business lobby group.

Unions said the new office should work towards closing loopholes which allow big companies to escape tax.

"The worry must be that this is simply a softening up exercise for tax cuts for the rich, while ordinary people see services slashed and VAT increased," said Brendan Barber, general secretary of the Trades Union Congress.

(Reporting by Sumeet Desai; editing by Stephen Nisbet)