HMRC was attacked over trust, consistency and accountability, in special Parliamentary committee, writes Hamant Verma (CIOT).
This is a summary of the first meeting of the All Party Parliamentary Group on Responsible Tax (the APPG) [held on Wednesday 16 November], excluding its AGM, since it received submissions on its inquiry into public confidence in HMRC’s capability to collect tax fairly and effectively. This is the second work stream of the APPG (following one on BEPS). It includes looking at customer service experience and how HMRC fights tax avoidance and evasion.
Jolyon Maugham, a barrister, told a packed committee room at the Commons that people are entitled to be concerned with HMRC because the Google settlement (among others) shows a tax authority that does not show an ‘even hand’. Maugham added that an NAO report found that HMRC’s wealth unit has achieved only one criminal prosecution in five years, creating a lack of trust in the tax authority. He said that HMRC ‘hides behind’ taxpayer confidentiality when the public want greater transparency. ‘Taxpayer confidentiality must be weighed against people’s lack of trust in the tax system,’ he said. HMRC is free to lobby the government to enact the legislation it needs, in the ‘public interest’. Perhaps it is not in HMRC’s interests to do so? he questioned.
Professor Kimberley Scharf, professor of economics at Warwick University, gave an economist’s view of trust. Prof Scharf said HMRC has access to ‘tax money’ to try and influence voluntary compliance and use enforcement, such as audits and fines. She said: ‘If [HMRC is] to spend a pound to try and influence the tax take, it must lead to an equal income of a pound.’ She was critical of efficiency savings at HMRC when it means that the taxpayers has to do more work. A lack of trust can undermine voluntary compliance and therefore HMRC’s chance of maximising its revenue. As with Maugham, she is sceptical of taxpayer confidentiality when it comes to business and said it is wrongly being looked at as an ‘absolute value’. ‘Taxpayers should not be referred to as customers… not collecting revenue makes people happy. HMRC is not here to make you happy – it is not McDonald’s. People need to be treated the same with consistency and continuity.”
Richard Murphy, director of Tax Research UK, said that HMRC is neither ‘reliable, truthful nor able’, key words in the Oxford English Dictionary definition of trust. Murphy said the tax authority does not answer telephone calls, letters and is shutting its offices and does not provide ‘adequate services’ such as an account manager for small businesses. He said its ‘tax data’ is a ‘work of fiction’ because it is full of estimates and leads to matters such as the size of the ‘shadow economy’ seeming smaller than it really is. He said: ‘Is HMRC able? No, too many staff have been culled … not enough fully trained tax inspectors. Competence has been taken out of the system. HMRC needs to localise, have a wider range of stakeholders on its board and there should be a minister responsible for the ‘workings of the tax authority’ to make it accountable to Parliament. He said that HMRC should be ‘open on a Saturday, which is as ‘important as a doctor [being available on a Saturday)’. He wants to see greater face to face services from HMRC, more localisation and for a career at HMRC to be seen as ‘valuable’.
There was an exchange between John Cullinane and the panel during a Q&A session. Cullinane, tax policy director at CIOT, said that many of the issues people have with trusting HMRC are determined by political debate and the government rather than HMRC. ‘If people want Google to pay more tax… you need to look at international tax rules.’ He said that the CIOT’s concern with ‘making tax digital’ is the ‘haste’ with which it is being consulted and implemented. He suggested the financial cost to HMRC of people ‘clinging’ to a model of physical interaction on the basis of trust is an ‘impossible standard’ to achieve. Murphy disagreed and said HMRC is a political department because it ‘only exists because of government’. Maugham added: ‘The laws can be wrong and HMRC’s enforcement of that law can be wrong.’
Maugham questioned the ‘absolute value’ given to taxpayer confidentiality because ‘when court cases starts, taxpayer confidentiality goes out of the window’. Cullinane responded that people at HMRC may be committing a criminal offence if taxpayers’ confidential tax details ‘come out’ before court proceedings are active, so it is another example of the political class setting standards that HMRC cannot feasibly meet. CIOT president Bill Dodwell added that ‘we do not want ministers or politicians, making decisions on individual tax liabilities (company or individuals)’, especially when decisions have already been made by people ‘whose duty it is’ to make them.
Chair of the APPG Dame Margaret Hodge said the committee will meet with HMRC chief executive Jon Thompson in private to discuss the many submissions to the APPG this autumn from stakeholders such as CIOT and LITRG on the state of HMRC.
HMRC was attacked over trust, consistency and accountability, in special Parliamentary committee, writes Hamant Verma (CIOT).
This is a summary of the first meeting of the All Party Parliamentary Group on Responsible Tax (the APPG) [held on Wednesday 16 November], excluding its AGM, since it received submissions on its inquiry into public confidence in HMRC’s capability to collect tax fairly and effectively. This is the second work stream of the APPG (following one on BEPS). It includes looking at customer service experience and how HMRC fights tax avoidance and evasion.
Jolyon Maugham, a barrister, told a packed committee room at the Commons that people are entitled to be concerned with HMRC because the Google settlement (among others) shows a tax authority that does not show an ‘even hand’. Maugham added that an NAO report found that HMRC’s wealth unit has achieved only one criminal prosecution in five years, creating a lack of trust in the tax authority. He said that HMRC ‘hides behind’ taxpayer confidentiality when the public want greater transparency. ‘Taxpayer confidentiality must be weighed against people’s lack of trust in the tax system,’ he said. HMRC is free to lobby the government to enact the legislation it needs, in the ‘public interest’. Perhaps it is not in HMRC’s interests to do so? he questioned.
Professor Kimberley Scharf, professor of economics at Warwick University, gave an economist’s view of trust. Prof Scharf said HMRC has access to ‘tax money’ to try and influence voluntary compliance and use enforcement, such as audits and fines. She said: ‘If [HMRC is] to spend a pound to try and influence the tax take, it must lead to an equal income of a pound.’ She was critical of efficiency savings at HMRC when it means that the taxpayers has to do more work. A lack of trust can undermine voluntary compliance and therefore HMRC’s chance of maximising its revenue. As with Maugham, she is sceptical of taxpayer confidentiality when it comes to business and said it is wrongly being looked at as an ‘absolute value’. ‘Taxpayers should not be referred to as customers… not collecting revenue makes people happy. HMRC is not here to make you happy – it is not McDonald’s. People need to be treated the same with consistency and continuity.”
Richard Murphy, director of Tax Research UK, said that HMRC is neither ‘reliable, truthful nor able’, key words in the Oxford English Dictionary definition of trust. Murphy said the tax authority does not answer telephone calls, letters and is shutting its offices and does not provide ‘adequate services’ such as an account manager for small businesses. He said its ‘tax data’ is a ‘work of fiction’ because it is full of estimates and leads to matters such as the size of the ‘shadow economy’ seeming smaller than it really is. He said: ‘Is HMRC able? No, too many staff have been culled … not enough fully trained tax inspectors. Competence has been taken out of the system. HMRC needs to localise, have a wider range of stakeholders on its board and there should be a minister responsible for the ‘workings of the tax authority’ to make it accountable to Parliament. He said that HMRC should be ‘open on a Saturday, which is as ‘important as a doctor [being available on a Saturday)’. He wants to see greater face to face services from HMRC, more localisation and for a career at HMRC to be seen as ‘valuable’.
There was an exchange between John Cullinane and the panel during a Q&A session. Cullinane, tax policy director at CIOT, said that many of the issues people have with trusting HMRC are determined by political debate and the government rather than HMRC. ‘If people want Google to pay more tax… you need to look at international tax rules.’ He said that the CIOT’s concern with ‘making tax digital’ is the ‘haste’ with which it is being consulted and implemented. He suggested the financial cost to HMRC of people ‘clinging’ to a model of physical interaction on the basis of trust is an ‘impossible standard’ to achieve. Murphy disagreed and said HMRC is a political department because it ‘only exists because of government’. Maugham added: ‘The laws can be wrong and HMRC’s enforcement of that law can be wrong.’
Maugham questioned the ‘absolute value’ given to taxpayer confidentiality because ‘when court cases starts, taxpayer confidentiality goes out of the window’. Cullinane responded that people at HMRC may be committing a criminal offence if taxpayers’ confidential tax details ‘come out’ before court proceedings are active, so it is another example of the political class setting standards that HMRC cannot feasibly meet. CIOT president Bill Dodwell added that ‘we do not want ministers or politicians, making decisions on individual tax liabilities (company or individuals)’, especially when decisions have already been made by people ‘whose duty it is’ to make them.
Chair of the APPG Dame Margaret Hodge said the committee will meet with HMRC chief executive Jon Thompson in private to discuss the many submissions to the APPG this autumn from stakeholders such as CIOT and LITRG on the state of HMRC.
