The Public Accounts Committee has hammered HMRC again in their most recent report. It identifies HMRC’s failings on two fronts; tax avoidance and evasion, and, unsurprisingly, customer service. How HMRC performs effects everyone from PAYE tax payers all the way through to multi national companies.
The Labour MP Meg Hillier, who chairs the PAC, summarised scathingly,
“HMRC must rapidly improve its customer service, previously described by the PAC as abysmal and now even worse to the extent it could be considered a genuine threat to tax collection. It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”
HMRC report – There were a couple of positives…
The report did acknowledge two positives with HMRC’s performance; the amount of tax collected has risen and, interestingly, their running costs have decreased during the previous five years. But these were but two drops of positivity, in a sea of negative conclusions.
HMRC Customer Service
Are you one of the 50 million UK taxpayers who call HMRC every year for a bit of help with your tax return, PAYE paperwork, or any number of other financial matters? Did you get through?
The PAC’s report states that have of all calls to HMRC between January and June this year were not answered – that’s 12 million unanswered questions. Of those answered, only 6 in 10 were picked up within the 5 minute target time.
Member of the PAC, Lib Dem MP, John Pugh has expressed entirely plausible fears that millions of us submitted incorrect tax returns simply because we couldn’t get access to the necessary information. Just because there is information online, doesn’t mean that taxpayers can always apply it to their own circumstances. In an interview with the Telegraph, Mr Pugh commented,
“Online tax returns have their place, but at the end of the day people do have problems and queries that they need answered. The tax system is very complicated and they need help.”
Pensioners have been highlighted as a potentially more vulnerable group as they often have more complex income tax circumstances and may be less confident using online systems.
The report is not only appalled by the level of customer service, but is unimpressed by the lack of a specific improvement plan from HMRC to tackle its problems effectively. It states;
“HMRC did not provide us with any indication of when or by how much its customer service would improve, beyond a vague aim to improve year on year. It acknowledged that people are more likely to pay the right tax when they find HMRC easy to deal with, but, in the words of its own Chief Executive and Permanent Secretary, ‘we are still struggling’. We are concerned that customer service levels are so bad that they are having an adverse impact on the collection of tax revenues.”
The PAC report also revealed that HMRC’s current performance indicators do not include the consistency of customer service provision and that this needs to be amended.
HMRC replied to these criticisms by saying;
“We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year and we had recruited around 3,000 new staff to improve service levels. But these customer service issues did not affect our ability to collect tax. We are disappointed that the Public Accounts Committee has overlooked HMRC’s record results, which include collecting a record £517bn in tax revenues and further reducing the UK’s ‘tax gap’ – the difference between what is due and what is collected – to ensure it remains one of the lowest in the world.”
Understanding of HMRC’s position has come from other quarters. Jolyon Maugham QC is a barrister who specialises in taxation said, “The abysmal customer service is down to operating in a resource-constrained environment; HMRC has experienced very deep cuts in funding.” Tax Justice Network’s Executive Director, John Christensen agrees and adds an interesting point,
HMRC’s resources have been severely depleted, not just by this government but by previous governments as well,” said Christensen. “Adding to this, there is a culture of kowtowing to corporations and financiers at the revenue. There’ve been a number of appointments from the private sector to HMRC that come saddled with numerous conflicts of interest.”
Tax avoidance and evasion
Hillier’s statement said,
“HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better. We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public.”
The PAC report suggests that HMRC should “identify and report the value of all tax avoidance schemes”, including those that are currently legal. This would stop tax avoiders “…gaining advantages never intended by Parliament”, according to Hillier’s statement. The report also suggested that HMRC should include the cash sums that are gained through their compliance work. The report’s conclusion contains harsh judgement on HMRC’s motivations for not currently being more transparent;
“HMRC still does not report on how much cash was received as a result of its compliance work or on the scale of aggressive tax avoidance which exploits loopholes in the law. HMRC also continues to avoid publishing information on the scale and nature of tax reliefs that would assist Parliamentary oversight of this area of the tax system.
“We see no case, other than to avoid accountability, for HM Treasury and HMRC to reject the previous Committee’s recommendations to improve transparency…”
HMRC replied,“We routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action. We brought in more than £1bn from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers.” HMRC also said that they cannot provide the figures suggested, which Maugham considered to be “absolute twaddle” and that they could “take a decent stab at it.”
But, in support of HMRC’s position, one of CBW accountants’ consultants, Robert Maas, said, “The PAC wants HMRC to work out what the tax paid would’ve been if we hadn’t granted individual reliefs, that’s an enormous job. They don’t have the figures; our tax system isn’t geared towards that”. Interestingly, Maugham describes this issue as “…the lack of transparency, this attitude that reliefs don’t need to be properly scrutinised – are cultural and political.” Is that something HMRC can change on their own?
It would seem that the PAC wants HMRC to do more with less. They are praised for reducing running costs and vilified for the subsequently plummeting level of customer service – as if the two are unconnected! It also appears that their conclusions call for HMRC to divert some of these ever-diminishing resources into producing a new series of ‘avoidance’ statistics; rather than focussing on righting the sinking customer service ship and the illegal activities of tax evaders.
Perhaps Mr Christensen was right when he said, “What’s needed now is a comprehensive review, HMRC needs to strengthen its capacity to tackle big companies and Britain’s elites. It needs to be made fit for purpose in the 21st century.”
