HMRC and the ESRC are working together to establish a joint programme of research on 'Tax Policy and Administration in the Context of Economic and Societal Change'. It is hoped this joint programme will support a number of key objectives including: strengthening the link between researchers and policy and practice; supporting knowledge transfer and improving the impact of analytical work; and encouraging inter-disciplinary and innovative working. 

The conference represents the first step in establishing this programme and specific research themes may include the following:

Improving understanding and modelling of behavioural impacts on tax policies and administration

Standard micro-economic models make simplifying assumptions about human behaviour both for ease of analysis and tractability. Some of these assumptions concern the rationality of individuals and, for example, assume that they have possession of all relevant information and are able to make complex optimisation decisions without taking account of cost consequences. Many economists have recently been relaxing these assumptions in various ways in order to try and capture more of the true processes by which people make decisions.

There is considerable scope for developing this work in the context of tax policy and operations.  Possible areas for new and innovative research include: savings and pensions tax policies aimed at providing incentives to behave in certain ways; compliance and personal risk behaviour modelling; and many other areas of contact between tax operations and individuals and businesses. Research could be focussed on identifying the full range of tax policy and operational situations that are likely to be affected by this, so called, 'non-standard behaviour'.

Optimising economic and organisational efficiency in the design and administration of tax policies and operations

A key concern for all tax administrations, whether in the UK or internationally, is to develop a better understanding of the administrative burden of taxes and regulations on business. There are numerous dimensions of this that could be explored e.g. how administrative burdens change over time, how to account for less than normally efficient businesses, how burdens can affect behaviour and the need to rebase administrative burdens periodically. There are Standard Cost models which attempt to quantify the administrative burden but they need to be developed much further including conceptual work to define all dimensions of what we mean by administrative burdens.

Notwithstanding administrative burdens, in the broader context of academic research on public policy and operations, there is a need to develop more sophisticated and robust modelling and evidence on the marginal efficiency costs of extra tax yield and the optimum efficiency of tax operations in general.

Developing better approaches to forecasting and modelling of the effects of tax structures and tax reforms

There is a need for academic input to developing existing and a new wider suite of models for tax forecasting, policy analysis and administration. For instance, the UK government has been developing and using a dynamic Computable General Equilibrium (CGE) model but there are necessary assumptions that limit the analysis e.g. the need to balance models to a steady-state growth path, the assumptions of perfect foresight and absence of risk. There is a need for research to investigate various methods of improving dynamic CGE models to make them more accurate in generating policy relevant information on tax reform.

Comparative learning from international approaches to tax policy and administration

It is likely that most governments, at least in OECD countries, have similar concerns in terms of the issues they face in optimising tax policy and operations. Comparative international research to attempt to identify and bring together potential solutions and lessons may, therefore, be extremely useful. Equally, it would be useful to conduct research on what can sometimes become the international dimension of domestic tax policy changes.