Parliament’s influential Public Accounts Committee has laid into Her Majesty’s Revenue and Customs (HMRC) office, claiming the the tax office’s customer service is so bad it could actually effect the total amount of tax collected.
The Public Accounts Committee has 6 big issues with HMRC, which it sets out in its sixth report on the tax office released on Wednesday. They are:
- HMRC does not report on the scale of aggressive tax avoidance, which means Parliament cannot assess whether tax law is working as intended. Avoidance is different from evasion and is where people exploit loopholes in the law to keep their tax bills down.
- The number of tax reliefs continues to grow but the scale and nature of the tax foregone is invisible to Parliament because HMRC refuses either to define them or list them comprehensively. In other words, HMRC doesn’t estimate how much tax is being lost by the introduction of new tax reliefs.
- HMRC is still failing to provide an acceptable service to customers and could not tell us when it would be able to do so. HMRC responded to just 50% of all calls it got and of those it did answer, it dealt with only 39% within 5 minutes. The committee says: “We are concerned that customer service levels are so bad that they are having an adverse impact on the collection of tax revenues.”
- HMRC’s performance measures do not cover delivering a consistent level of customer service throughout the year. Not only is customer service bad, it looks like it’s getting worse. The 50% of responses is down from 72.5% last year.
- The number of criminal prosecutions for offshore tax evasion is still woefully inadequate. There have been only 11 prosecutions in relation to offshore tax evasion since 2010 and only one from the list leaked by a former HSBC employee of over 3,000 UK citizens that could be potential evaders. HMRC says there wasn’t enough evidence and is now offering reduced penalties to people who confess to tax evasion. The PAC doesn’t think this is enough.
- HMRC’s public reporting of the additional tax revenue it generates from its compliance work (compliance yield) remains unnecessarily complicated and confusing. The PAC says the current measure given in HMRC’s annual report is “a combination of measures, calculated in different ways and covering different time periods. It includes some cash that is owed, estimates of tax losses prevented and estimates of the impact of its work on tax revenue in future years.”
The criticisms may seem a little harsh given that since 2010 the amount of tax collected has risen every year as costs and budgets have been reduced. In 2014-15 HMRC collected £517.7 billion ($US789.1 billion), £11.9 billion ($US18.3 billion) more than the year before.
But Labour MP Meg Hillier, chair of the PAC, says:
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. It’s also important that the majority who play by the rules, paying their tax on time and in full, see that those who don’t will face the consequences.
Tax avoidance also remains a serious concern. Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament. If tax law is to be improved then HMRC must as a priority provide Parliament with comprehensive details of avoidance.
HMRC must also 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.
The BBC quotes a HMRC spokesperson as saying: “We are disappointed that the Public Accounts Committee has overlooked HMRC’s record results, which include collecting a record £517 billion in tax revenues.”
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