I note there’s a report in the Telegraph today saying big business is so unhappy with HM Revenue & Customs that 20% of them are thinking of leaving the UK. I’ve often thought about taking up basket weaving as an alternative career (only kidding). The chance of these companies leaving is about as likely as the latter. So let’s dismiss the nonsense and at he same time recognise that business of all size has a valid gripe with HM Revenue & Customs.
Big business admittedly gets by far the best service from HMRC — but even they’re not happy and as a very senior representative of business tax professionals who took me out to lunch yesterday suggested, it’s not hard to explain why. Once upon a time (yes, this a fairy tale, but with a sorry ending) big business enjoyed continuity in its relationship with its inspector of taxes. The current Customer Relationship Manager post in HMRC is meant to replicate that. But it doesn’t because that CRM works in the Large Business Service and as such has remarkably little discretion for action. So they follow the line. Which is the official explanation for why last week HMRC boss Dave Hartnett had to tell them to stop being so rigid about litigating with big business. All these people thought they could do was follow the diktat on tackling avoidance — laid down by Hartnett himself — and not use their discretion.
But when these Customer Relationship Managers were instead called District Inspectors — and had discretion in the action they could pursue as a result because they were, within reason, in charge — they used that discretion and things worked much better. They also stayed in post a lot longer.
And because they also, by and large, worked locally they had the knowledge to react locally.
And then along came David Varney and all that was swept aide in the name of efficiency. Central control — similar to that of large corporations — replaced local discretion. Uniformity replaced local knowledge. Relationships based on continuity were replaced by rotating specialists. And nothing worked as well is it might.
Why? Because just as centrally organised, target driven, big business does not understand entrepreneurial spirit — which is the preserve of the more effective small enterprise that as a result makes better returns on almost all measures that can be used (and even higher returns on those that can’t be measured) than big business so did local tax offices actually perform better than centrally controlled big ones.
But those who HMRC have engaged from big business have not understood that. Or the importance of relationships. Or the importance of location. Or the importance of local knowledge. And those are very good reasons why we have a tax gap.
Bring back the local and the discretion that went with it was the message I heard, loud and clear. Anyone listening at HMRC?
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“Because just as centrally organised, target driven, big business does not understand entrepreneurial spirit — which is the preserve of the more effective small enterprise that as a result makes better returns on almost all measures that can be used (and even higher returns on those that can’t be measured) than big business so did local tax offices actually perform better than centrally controlled big ones”
You may not realize this, but you are making a perfect case that (just as with healthcare, education, waste management, etc. etc.) tax collection could very effectively be outsourced to properly licensed local or national private operators under fixed and variable revenue sharing arrangements. This is the way of the future.
@Ted G
If you honestly think such forms of anarcho capitalism – with all the corruption associated with them – will ever happen in the UK you are seriously deluded.
Having strong local management and discretion in a state system is about as far removed from what you describe as it is possible to get.
@Richard Murphy
I have no doubt that this is unlikely to happen in the short-term. But this is more due to the vested interests and political influence of the public sector’s workforce than to the risk of corruption, which is at least as high in a state collection systems (Italy, Argentina or Nigeria would be exhibit A to support this).
In the meantime, any improvement to the current system will be welcome.
Richard
Agree entirely with your analysis of how HMRC has developed.
I also used to get the impression that the old DI and the Inspectors were technically sound. Well trained and in a culture that promoted technical expertise. I am just not confident that is the case anymore and the CRM is not a technical role.
The Telegraph’s ‘story’ refers to one of dozens of questions contained in a survey commissioned by HMRC almost 12 months ago. It’s just that the results have only recently been published. These may have a value to HMRC but they are almost irrelevant as a measure of current opinions.
The main focus of the survey was to ascertain perceptions of change to HMRC’s relationship with it’s customers. The aim of the research was stated to be to help HMRC to be more responsive to large businesses.
Deep in the questionnaire there are two questions which have been the focus of media coverage:
“To what extent does HMRC’s ADMINISTRATION of the UK tax system affect how competitive the UK is as a place to do business?’
and
“In the last 12 months. has your organisation considered re-locating the business, or parts of the business, from the UK to another country for TAX PURPOSES?”
Looked at in the context of the whole questionnaire these seem startlingly out of place. Almost every other question relates to the relationship with and service provided by HMRC.
I’m curious as to why these questions were even asked in Autumn 2009. My own comment on the subject goes live on my 🙂 tax-buzz blog on Tuesday.