I have defended HMRC’s right to collect the tax owing to it as a result of the error on its part in processing PAYE data.
But let’s put this matter very firmly in context. As the Guardian has reported:
On Friday the Revenue admitted it had made mistakes in collecting tax through the Paye system from nearly 6 million taxpayers. Around 4.3 million have paid too much and are due a refund, worth £1.8bn, while 1.4 million had underpaid a total £2bn and will have to pay an average of £1,428 each in further tax.
The £1.8 billion will, I am sure, be paid. Not all the £2 billion will be recovered.
In combination these errors (and there may be more to find as yet and the vast majority will not net off, so adding the two figures together is a legitimate thing to do to assess the total scale of the problem) come to £3.8 billion.
In 2007/08 and 2008/09 — the most likely years for which tax will be recovered, the following summarises the cost of running HMRC, based on its own accounts:
|
Year |
2008-09 |
2007-08 |
|
|
£m |
£m |
|
Staff costs |
2740.7 |
2787.6 |
|
Admin costs |
1943.1 |
1835.1 |
|
Income generated |
(742.1) |
(661.6) |
|
Net cost |
3941.7 |
3961.1 |
The errors now identified do, therefore, represent near enough the entire cost of running HMRC for a year.
The cost of potentially irrecoverable underpayments represents the cost of running HMRC for more than six months.
The absurdity of imposing staff cuts and reorganisation on HMRC that left it in such chaos that errors totalling the entire cost of running it for a year were not addressed is apparent.
Who is to blame? Well Gordon Brown, obviously.
But let’s also be clear. This chaos started when HMRC began to drag in private sector managers to run the department with absurd ideas of turning it into a giant factory churning out, as it transpired, incorrect paperwork.
I blame a culture that said HMRC could be removed from the places where the people who were paying the tax were — treating tax payers like objects in other words by closing local tax offices and denying people the opportunity to ask the questions they needed of trained staff who were dealing with their affairs in the locality where they lived.
So I blame the culture David Varney introduced when he arrived at HMRC from O2.
I blame non-execs from places like Barclays Bank who have clearly not asked the right questions and demanded the right solutions.
I blame the career civil servants who bought into the corporate efficiency clap-trap they were sold by the likes of Varney and their business non-execs.
And I blame an under resourced House of Commons where select committees do not have the resources to undertake the research to make sure they ask the right questions.
What’s needed now to prevent this? Tax people in charge of HMRC for a start.
An end to the staff dismissal programme.
A new emphasis on taxing people from offices in the communities where they live.
A new culture of getting things right — not doing things on the cheap. Tax is not the same as a budget supermarket operation.
A commitment to tax justice.
A commitment to tax compliance.
And all this will cost less than the mess HMRC has made.
Much less.
Which is the price of bringing private sector failure into the public sector — which is the real lesson here.
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[…] over five years (my preferred route) rather than chase them all. But if it does then it has, as I’ve just suggested, got to reform the management and culture of HMRC at the same time — which means kicking out its […]
Why should HMRC have a commitment to “tax justice”? They are there to collect what is due to them under law. “Tax justice” has nothing to do with the way it is run.
And not forgetting CapGemini and their Aspire outsourced IT contract. Originally estimated at £2.8bn the contract was criticised by the Commons Committee of Public Accounts when the revised estimate over 10 years was a cost of £8.5bn:
http://www.parliament.uk/business/committees/committees-archive/committee-of-public-accounts/pacpn070612/
The Committee commented:
If it wasn’t outsourced, HMRC wouldn’t have to pay anyone’s profit and would have an internal team of people actively working in the best interests of the taxpayer!
The writing on the wall was visible when we saw HMRC’s PFI contract – the tax collectors working in buildings run by a company based in Bermuda for tax avoidance reasons. I would add three exclamation marks to that, but I need to save then for the fact that the then chairman of the Revenue, Sir Nicholas Montague, argued that legal tax avoidance was no reason to discriminate against a bidder!!!
(Interestingly, Mapeley now describe themselves as Guernsey-based on their website)
James in Jersey
As someone who’s worked in HMRC since 2003, and seen the organisational mess and decreasing staff morale caused by the cost-cutting agenda driven by politicians, I can only agree with every word of the above article.
Absolutely right!
@Alan Barnes:
On the contrary: tax justice does matter. There are numerous allegations that HMRC take a far more relaxed line about tax compliance with the very wealthy than they do with other taxpayers; some of the allegations state that this is not a discretionary matter but official policy.
If those allegations are true, the whole structure of society is at risk – because in due course everyone will excuse tax avoidance and evasion with the defence that “you let them get away with it”.
I notice that income generated in 2008-09 increased from 2007-08, despite a fall in staff costs, and despite a recession.
So the hypothesis that cost-cutting is damaging HMRC looks shaky. Contrary to the belief of many on the Left, quantity (of money) does not always equate to quality (of output).
“If it wasn’t outsourced, HMRC wouldn’t have to pay anyone’s profit and would have an internal team of people actively working in the best interests of the taxpayer”.
Precisely; the dogma of ‘private good, public bad’ results in the public sector aka the taxpayer subsidizing private profit.
@Harry Waterman
And it was the wrong tax
How absurd can you get?
Anyone can push something for period – the result is a loss of quality and usually a system failure
That’s happened
0/10 for analytical ability
@James
Precisely
@James
I notice they are “allegations” (as they often are around here…)
But let’s assume they are true.
It is still a matter of the law. If it is true that they are taking a more relaxed line towards the wealthy, then they are failing in their statutory duty to collect the tax due to them under law. As I say, that is a matter of law, it is not a matter of “tax justice”.