Margaret Hodge's Public Accounts Committee is continuing its excellent work, that is much despised by the tax profession because of the effectiveness of what she is doing.
Today she has highlighted the 'gobsmacking' (her word) ineffectiveness of HMRC is tackling tax avoidance. She has highlighted many issues that she suggests mean HMRC lack of willing costs the UK £5 billion a year, but there were many more issues she could have addressed.
Why is it, for instance, that despite HMRC having the power to name and shame people making tax settlements in civil cases of in excess of £25,000 a year they have never done so? Are all those 6,000 tax cases from HSBC to be settled without anyone being named? If so, why?
And why is it that since 2010 (if I recall correctly) HMRC have had the power to fine finance and tax directors personally for the failure of their companies to keep proper tax records and yet they have not ever done so. That implies they have never found a company with dodgy transfer pricing records since then. And that is absurd.
These laws were created for a reason. Unless they are used they will have no deterrent effect. Is it deliberate that HMRC won't use them?
Or is it just a shortage of resources that HMTC just won't admit?
Either way Margaret is right: there is something seriously wrong.
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Brown-Balls did two things. They created laws to provide the appearance of a high standards tax system while running down HMRC to reassure the hyper rich that the laws would not be enforced.
A shortage of resource may well – and probably is a factor, Richard. But knowing something of large hierarchical organisations (having worked in a few over the years, and also a fair bit of the theory side, I’d suggest that another significant factor is the “message” that comes down from the senior management and leadership of HMRC, which would include the various boards, etc, and the Treasury and Ministers.
I put message in inverted commas because in some cases instructions not to do certain things, such as name and shame, etc, will be explicit – if not necessarily documented. But given what we know of the degree and extent of the corporate capture of HMRC I suspect that HMRC staff implicitly know what powers and policies they should or should not pursue, and what will happen if they break those “conventions”. In short, the culture of the organisation has been corrupted (as I’d see it) in such a way that pursuing policies and actions that are in the broader public interest is no longer regarded as HMRC’s primary function. Instead – like a massive amount of government and public service – HMRC has taken on an “enabling” role, which primarily focuses on doing everything it can to promote (i.e. enable) the interests of big business and the 1%.
Don’t forget, that for the past 30 years people working in government and public service have been endlessly lectured, preached at and bombarded with the message that it’s big business and the 1% that are THE wealth creators and thus to do pretty much anything that doesn’t “enable” pretty much their every desire and demand is, by definition, at the least disruptive and at worst destructive.
Once organisational culture based on such a set of beliefs and values takes hold it takes a lot – and a long time – to shift. It won’t now happen at HMRC without a significant change in the personnel that currently occupy senior management and leadership roles there, and I see no evidence that any political party has the desire or balls to attempt that task and thus refound HMRC as an organisation that truly acts in the public interest. So, for now we’ll have to leave it to Hodge and her committee to make life as uncomfortable for HMRC’s senior management as they can.
Ivan
I am very tempted to turn this into a lo
Or you want to do so?
Richard
What is a ‘lo’, Richard?
A word only known on an iPad touch keyboard
Will edit!
Having a deliberately de-toothed regulatory body which gives the semblance of supervision and enforcement, is a very old trick. It bridges the gap between public demands for fairness and the private for deregulation.
As I understand it, neoclassical economists assert that the unfettered market is both self-regulating and self-cleansing. Fraud is a rare event and therefore does not need regulators. However, the general public is much more likely to be persuaded by Gresham’s dynamic:
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence. George Akerlof (1970) (his seminal article on markets for “lemons”).
Gresham’s dynamic was significant in the MPs expenses scandal… but it also showed that there were honest brokers amongst the MPs .. and Margaret Hodge is unquestionably doing a great job on the Public Accounts Committee.
Trusts must be addressed!
I think the lack of naming and shaming is that people are shy of doing it. No-one wants to be the first one to stand up and point at people, it’d be like challenging someone who’s pushed to the front of a bus queue. Yes, it ought to be done; but no, I don’t want to be the one seen to be doing it.
The whole taxing the rich thing seems to be something that HMRC have been shy of for many years, according to two former tax inspectors that I know.
Both told me (seperately) very similar stories.
These stories relate to the 7o’s when both were young office juniors in tax offices in completely different parts of the country, both of them socialists.
Both accidently picked up piles of files and placed them on their desks, to work through during the day.
Both piles of files were for ‘the better off’ and both the young inspectors had the files taken off of them by their immediate bosses’ boss,, and asked “where did you get the files from?”. They were then told that “You don’t do that work”.
Both assumed that as it was the beginning of their careers the wouldn’t be dealing with richer people, as their financial affairs were bound to be more complicated.
I have not old these stories with total accuracy, I will contact both of these people that I will call Vic and Carmen because that is their names..
I tell juniors here “you don’t do that work”. Because as it is the beginning of their careers they shouldn’t be dealing with richer people, as their financial affairs are more complicated.
Start people on P60 + P11D cases, then move them to ones with investment income, then bring in sole trader accounts, then partnerships, and so on. The ones with multiple employments, a varied portfolio of investments, and fingers in various business pies can wait a few years.
So now we know you’re one of those HMRc officials who so badly fail it
No, I’m in private practice. I’ve never worked for HMRC.
Ivan Horrocks is correct – the culture in HMRC Large Business Service is one of “customer facilitation”. This is why they have well paid( for the Civil Service) Customer Relationship Managers. I heard of one case where the case officer wanted to issue assessments but the CRM tried to dissuade him as ” I do not want to upset the customer”.