The news that the Public Accounts Committee of the House of Commons has condemned the way in which HM Revenue & Customs staff have handled their dealings with the United Kingdom’s largest corporate taxpayers is merely the latest of a series of PR disasters for a Government department that now raises nearly £500 billion for the public purse annually.
Accusations that Vodafone was allowed to avoid more than £1 billion in tax, and that Goldman Sachs was erroneously allowed to pay an enquiry settlement without interest amounting to £10 million, are alleged to be just the tip of the iceberg, with the Public Accounts Committee suggesting that as much as £25 billion is in dispute between large companies and HMRC.
Meanwhile, the PAYE system, which deals with more than twenty-five million taxpayers, is reported to have collapsed under the strain, with hundreds of millions of pounds of income tax written off through failure to carry out timely reconciliations, and significant delays in making repayments to taxpayers.
And with levels of engagement (read morale) amongst HMRC staff the lowest in the Civil Service and the Public and Commercial Services Union, which represents the majority of them, more militant than ever, there are real doubts about the Department’s leadership.
Chief Executive, Dame Lesley Strathie, was recently forced to retire through ill-health, and with the Permanent Secretary, Dave Hartnett announcing his hitherto unexpected retirement next summer, the incoming Chief Executive, Lin Homer, has quite a challenge on her plate.
So, if you were in her shoes, what would you do?
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9 Comments
Has anyone got any links to some actual reports? As an accountant, I’d like to read more than headlines from the Guardian and Daily Mail announcing how this is the end of the world, and understand whether this is a case of undue exceptions or correct application of tax law.
I’ve heard it said that an IT system that doesn’t work and constant mind-changing by the Labour government (don’t know if it’s got better or worse under the coalition) are major factors. If this is so, it’s a depressingly familiar story.
If I were the new Chief Exec I’d be saying let me get on with the job and I promise to treat all taxpayers equally under the law.
I watched in utter disbelief reports as both the BBC and C4 news tonight revealed the way HMRC treats big clients like mega-corporations and banks. It is obvious to anyone that they most certainly do not treat small & medium businesses the same as they treat the big guys. How many small business owners get posh meals (probably paid for by taxpayers, no doubt) and the chance to discuss favourable tax arrangements with high-ranking civil servants? No, small business owners get the underpaid, overworked person in a call centre and a visit from the bailiffs if they don’t pay every penny of their owed tax. Letting huge, already unimaginably profitable companies like Vodafone get away with not paying billions of pounds in tax in a time of national crisis such as now is morally inexcusable and is more proof, if it were needed, that there is not even an illusion of a level playing field when it comes to tax.
Protest groups like UKUncut have been proven correct. They may have often been hyperbolic but they were damn right to highlight this scandal which, if we don’t do something to fix, will be another issue the public will not forgive us for.
Surely our stance is “simplification”. One thing I’ve heard suggested is that the tax code is so complex that for the ultra-massive corporations there is simply no “correct” figure which can be calculated for how much tax they owe.
I agree with Hywel. The Slovak equivalent of Tolley’s is about the size of an Argos catalogue, and it is possible to sit and read through it and know everything you need to know to run a business.
When I do a “zero-rated cross border services invoice” (e.g. translating in Slovakia for a VAT registered client in the UK then emailing the result over to them – these are special because the client declares the VAT himself and pays it direct to HMRC, not through the supplier as with single-country services invoices) the Slovak text on it says something like “see paragraph X of the VAT law”. The English text says something like “see HMRC leaflet 1234” – because British tax law is so complex and user-unfriendly that you can’t expect people to find their way around it. This is not just a problem in tax, generally in the UK laws (including relevant judgements) are so complex and not all in one place so we simply have to rely on the government (or lawyers) to tell us what the laws actually are instead of reading them directly.
Sorry, to add to what I wrote – the point is that clear, objectively defined laws, which non-specialists can read, understand and comply with are the the basis of a fair justice system.
To answer Mark’s question (what would you do in her shoes) very directly, proceed very carefully and be very political (in a “Yes, Minister” sort of way). She can do no else.
This scandal has long been reported on some blogs, e.g.
http://www.taxresearch.org.uk/Blog/
so the only surprise are (a) that the PAC has blown it wide open, and (b) that the media have reported it. Top marks to UK Uncut who changed the climate of opinion and made sweeping this under the carpet impossible.
It is reported that in settling these big cases Dave Hartnett did not follow HMRC’s own proceedures. If so, he should be dismissed immediately, not sometime next year. Proceedures are partly to protect the integrity of the process but partly also to protect the individual. If he has indeed neglected the first he should suffer the matching loss of protection. Anything else is to open the door to corruption (not that corruption is suggested in this case although a lot of wining and dining is).
For the future the real change has to come at the politcial level not at the CEO level. For at the top level where things get political any bureaucracy operates with two sets of instructions. There is a explicit one that is in the public domain (in this case to collect tax according to the rules and impartially) and a second covert one understood by senior staff (in this case to go easy on big firms for fear they might relocate overseas). This can never/will never be admitted because it conflicts with the explicit brief. Senior staff will have understood that what they were required to deliver in recent years was “light touch” (meaning mostly “no touch”) regulation.
The Conservatives want to continue with “light touch” as most of them still believe in trickle down economics – that wealth will create jobs and prosperity for all even though this is a theory they could refute simply by leaving the Westminster/City bubble.
For an alternatives there are three things we can and should do, (a) publish large company accounts, (b) move to end tax avoidance which is a major and thoroughly disreputable industry in which the UK is the world leader, and (c) promote a “pay to play” approach. Companies that won’t pay their fair share of taxes should not be able to benefit from public assets in this country or access our markets.
There’s a good, relevant article about tax avoidance by Stephen Williams MP at
http://stephenwilliamsmp.wordpress.com/2011/12/05/a-new-way-to-tackle-unfair-tax-avoidance/
Any chance we could just abolish it?