HMRC will reduce resource spending by 15% and capital spending by 44% over the four-year spending review period, the Treasury announced, with £900 million of those savings ‘then being recycled’ to transform HMRC’s work against avoidance, evasion and criminal attack and bring in extra revenue of £7 billion a year by 2014/15.
The Department is expected to reduce its administration costs by a third by 2014/15. Other savings identified include a restructuring of the Enquiry Centre network and improved online support to reduce manual processing.
Efforts to reduce the tax gap will involve a fivefold increase in prosecutions and a crackdown on offshore evasion.
David Gauke, the Exchequer Secretary to the Treasury, said HMRC would play a vital role in reducing the deficit, refocusing its resources to maximise revenues.
'It will become a lot harder for both individuals and companies to evade or avoid tax as HMRC refocuses resources to prevent this before it happens, and to deal with it more effectively when it does,’ he said.
The Treasury itself will reduce resource spending by 33% and capital spending by 30% in real terms. Its administration budget will be reduced by 33%.
‘Attack on public services’ Responding to the Chancellor’s announcement of 490,000 public sector job losses over four years, the Public and Commercial Services Union said the spending review was ‘an unprecedented attack on the welfare state, public services, communities, jobs and benefits’. The union represents 62,000 HMRC staff, a spokesman told Tax Journal.
Mark Serwotka, the PCS’s General Secretary, said: ‘This spending review will throw a generation of people on the scrapheap. These cuts are a political choice, there is an alternative, not a penny needs to be cut, nor a single job lost.
‘Rather than attacking the vital services offered by our members and removing jobs from some of the most vulnerable communities across the UK the coalition should be creating jobs in both the public and private sectors, closing the £120 billion tax gap, introducing a Robin Hood Tax on banking speculation and investing in our future.’
The PCS was ‘ready to take co-ordinated action with other unions and community groups to build an opposition to these cuts and overturn them’, he added.
HMRC has estimated the tax gap at £42 billion.
Other reaction Tax professionals expressed concern over the impact on HMRC’s effectiveness. Given the complexity of the current tax code the proposed cuts in HMRC's budget ‘threaten its ability to operate effectively’, said Neal Todd, a Senior Tax Partner at the law firm Berwin Leighton Paisner.
‘A diminished HMRC can only administer the system fairly if the tax system itself is simplified. The recommendations of the Office for Tax Simplification cannot therefore come soon enough,’ he said. ‘The key to long term prosperity is growth. A simpler and internationally competitive tax regime is vital to attract business and investment to the UK.’
Michael Izza, the ICAEW’s Chief Executive, said HMRC had already had to make significant efficiency savings in recent years. ‘At a time of fiscal austerity, the government should not compromise its ability to collect revenue. I would not want further cuts to its budget to undermine this,’ he said.
HMRC will reduce resource spending by 15% and capital spending by 44% over the four-year spending review period, the Treasury announced, with £900 million of those savings ‘then being recycled’ to transform HMRC’s work against avoidance, evasion and criminal attack and bring in extra revenue of £7 billion a year by 2014/15.
The Department is expected to reduce its administration costs by a third by 2014/15. Other savings identified include a restructuring of the Enquiry Centre network and improved online support to reduce manual processing.
Efforts to reduce the tax gap will involve a fivefold increase in prosecutions and a crackdown on offshore evasion.
David Gauke, the Exchequer Secretary to the Treasury, said HMRC would play a vital role in reducing the deficit, refocusing its resources to maximise revenues.
'It will become a lot harder for both individuals and companies to evade or avoid tax as HMRC refocuses resources to prevent this before it happens, and to deal with it more effectively when it does,’ he said.
The Treasury itself will reduce resource spending by 33% and capital spending by 30% in real terms. Its administration budget will be reduced by 33%.
‘Attack on public services’ Responding to the Chancellor’s announcement of 490,000 public sector job losses over four years, the Public and Commercial Services Union said the spending review was ‘an unprecedented attack on the welfare state, public services, communities, jobs and benefits’. The union represents 62,000 HMRC staff, a spokesman told Tax Journal.
Mark Serwotka, the PCS’s General Secretary, said: ‘This spending review will throw a generation of people on the scrapheap. These cuts are a political choice, there is an alternative, not a penny needs to be cut, nor a single job lost.
‘Rather than attacking the vital services offered by our members and removing jobs from some of the most vulnerable communities across the UK the coalition should be creating jobs in both the public and private sectors, closing the £120 billion tax gap, introducing a Robin Hood Tax on banking speculation and investing in our future.’
The PCS was ‘ready to take co-ordinated action with other unions and community groups to build an opposition to these cuts and overturn them’, he added.
HMRC has estimated the tax gap at £42 billion.
Other reaction Tax professionals expressed concern over the impact on HMRC’s effectiveness. Given the complexity of the current tax code the proposed cuts in HMRC's budget ‘threaten its ability to operate effectively’, said Neal Todd, a Senior Tax Partner at the law firm Berwin Leighton Paisner.
‘A diminished HMRC can only administer the system fairly if the tax system itself is simplified. The recommendations of the Office for Tax Simplification cannot therefore come soon enough,’ he said. ‘The key to long term prosperity is growth. A simpler and internationally competitive tax regime is vital to attract business and investment to the UK.’
Michael Izza, the ICAEW’s Chief Executive, said HMRC had already had to make significant efficiency savings in recent years. ‘At a time of fiscal austerity, the government should not compromise its ability to collect revenue. I would not want further cuts to its budget to undermine this,’ he said.
