The FT has reported:
Revenue & Customs will adopt a less combative approach to resolving tax disputes with businesses in a move designed to cut a mounting legal logjam and unlock billions of pounds tied up in court battles over avoidance.
Dave Hartnett, permanent secretary for tax at HMRC, said there had been examples of officials being too “tough” in disputes over tax assessments. “HMRC is packed full of very intelligent people, but we are sometimes too black-and-white about the law,” he told the Financial Times.
The move, part of a drive for greater efficiency on the part of the cash-strapped department, could produce what Mr Hartnett called a “surge” in revenue over a couple of years, on top of extra money being collected in cases of individual tax evasion.
So Hartnett, the man who just a few years ago said that he’d make sure tax avoidance was ‘no longer worthwhile’ is now going soft on it in the week Nick Clegg said that the coalition is considering the introduction of a new rule “to ensure that wealthy individuals pay their fair share of tax” and a week or so after Cameron says he’s going to make the fight on benefit fraud his number one priority.
Have no doubt, Hartnett could not have said this without Osborne’s permission. Have no doubt too he’s being used as the answer to Nick Clegg — telling him totally unsubtly that there’s not a hope that Osborne is buying any measures to crack down on avoidance at all.
Of course Hartnett has to be pragmatic — he’s one of the Board of HMRC who got rid of one in eight of their front line staff last year who were likely to tackle tax avoidance. Of course he has to be pragmatic. The carelessness of losing the people who could have collected the tax leaves him no other option.
But the messaging is dire. What this says is the Coalition is happy for the rich to abuse, will be soft on their abuse, will not be seeking to enforce tax law (that’s explicitly what Hartnett has instructed his staff not to do) and does not care that it was a lack of tax income, not a loss of control of spending, which gave rise to this crisis.
And the Treasury is also using a senior civil servant to snub the deputy prime minister.
As fiascos makers go this mob are proving themselves masters of the art.
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Working as I do in an admittedly relatively minor role in HMRC, I find the above depressing but unsurprising. Staring with Gordon Brown’s cuts in our staff levels, and now being continued to an even greater degree with this government, there seems to be an absolute inability on the part of the board of HMRC to stand up for the department and it’s staff against the utter stupidity of our politicians.
As you’ve said yourself time after time Richard, and as the unions have said, and as any sane person could see, for every pound invested in HMRC staff the government receives in income at least ten times as much tax, if not far more. Yet we’re now going to be scalped like every other government department, so the tax evaders and tax avoiders will be able to get away with more and more.Morale in the department is already low, God knows what it’ll be like after the CSR.
Still, I suspect this is exactly what the Tories want. They’ll persecute the benefit ‘scroungers’ who fiddle the system for 1 or 2 billion a year, but ignore the far greater loss through tax evasion and avoidance. When their cuts have helped to contribute to a recession bound economy, and HMRC is increasingly unable to do its job, they can say that due to the terrible financial situation, the welfare state (it only encourages dependency, you know, things were much better in the thirties) and the NHS are ‘luxuries’ the country can no longer afford.
Meanwhile, the bankers who got us into this continue to behave exactly as before, and have been rewarded with a wholly regressive cut in Corporation Tax.
I don’t think I’ve ever been so depressed about the future, speaking both as a public sector employee, and a citizen of the UK. What the hell are the Lib Dems (Vince Cable, are you listening?) doing to stop this?
I’ll have to put you down as mischievous Richard – as distinct from naive.
As I’ve explained in my commentary on the FT article (on my TaxBuzz Blog):
http://taxadvicenetwork.blogspot.com/2010/08/dont-be-fooled-hmrc-are-not-going-soft.html
Only very naive or mischeivous advisers and commentators would suggest that this change in approach means HMRC walking away and letting more companies get away with ‘abusive’ tax avoidance activities.
Contrary to the implication given by your comments the article itself makes clear that: “The Revenue’s fresh approach is primarily focused on business rather than wealthy individuals.” It’s hard to reconcile this with your accusation that the messaging here “is the Coalition is happy for the rich to abuse, will be soft on their abuse, will not be seeking to enforce tax law”.
I know Dave. The prospect of him going ‘soft’ on ‘abusive’ tax avoidance, whether undertaken by individuals or businesses, is as likely as Gordon Brown being invited to join the coalition government.
You campaigning zeal is admirable whether or not I always agree with your objectives. But pieces like this that appear to twist the facts to suit your agenda could diminish your credibility which would be a shame.
@Mark Lee
As you know – I too know Dave Hartnett
And I also know a lot of people who work in HMRC
And I hate to say it – but based on my conversations with HMRC board members I think the story is wholly true as I report it
And that is confirmed by what people are being told to do on the ground
I’m being neither mischievous or naive – it’s wishful thinking on your part that I might be – or that as imply Vanessa Houlder of the FT might be as you have also suggested. I think we have accurately interpreted what is going on.
As an HMRC board member (not Dave Hartnett) said to me a whole ago “We have a duty to help Anglo Saxon capitalism survive – it’s all we’ve got”.
That is what is happening.
And yes that is meaning radically different approaches are being taken on benefit and tax fraud, on large and small business, and that the approach Dave Hartnett trail blazed is being phased out – as Vanessa Houlder reported.
How that won’t help the groups I identify beats me Mark
So there’s no risk of loss of credibility here – this story confirmed what I already hear from the ground. I may be ahead of the curve, but that’s all I’m risking. Look at what the previous commentator said for corroboration.
And yes – I do think ‘being commercial’ is being ‘soft’.
Is upholding the rule of law a commercial activity? I don#’t think so. it shows how far inappropriate thinking has invaded Whitehall – and HMRC’s board in the wake of Varney – that this can even be thought appropriate.
We’ll have to agree to differ this time Richard.
For the record though I passed no comment on Vanessa other than to recognise that she is highly regarded. Her piece excludes any assumptions that HMRC will be “softening” their stance on avoidance. That’s only in the headline which I suspect was created by a sub-editor anyway. In any event what is described in her article is a long way from going soft.
In response to one of my comments about the move being to one that is more commercial rather than soft, you ask “Is upholding the rule of law a commercial activity?”
My point was about adopting a commercial approach to decisions about whether or not to litigate. As I say on my blog:
“Not surprisingly HMRC are under pressure to reduce costs. They want to reduce the resources they tie up in long-lasting disputes and the number of cases they lose. In the real world of course even if HMRC are advised that they have a more than 50% chance of winning, it’s likely that the taxpayer has been told the opposite (ie: that HMRC have a less than 50% chance of winning). Either side could still lose.”
For the record I have also been blogging about the stupidity of cutting HMRC staff numbers (a policy instituted by Gordon Brown) – eg: here:
http://taxadvicenetwork.blogspot.com/2010/08/is-there-any-future-for-tax-amnesties.html
and here:
http://taxadvicenetwork.blogspot.com/2010/08/why-does-it-take-hmrc-2-months-to.html