The Public Accounts Committee has held its review into H M Revenue & Customs' management of the tax affairs of multinational corporations and now it has spoken in a report that will be available on the web later this morning. Of HMRC it has said:
The UK Government needs to get a grip on large corporations which generate significant income in the UK but pay little or no tax.
HMRC lacked clarity when explaining its approach to enforcing the corporation tax regime.
HMRC needs a far more determined approach to dealing with multinationals and their tax affairs.
That's because they say:
HMRC is too passive in its approach to closing the tax gap.
As they put it:
This Committee lacks confidence that HMRC both has and is using the business intelligence systems it needs.
I think if they'd just said "this committee lacks confidence in HMRC" they may have been closer to the truth. In their more detailed comments they say:
We were not sufficiently convinced by the Department’s assertion that it was pursuing all the tax due from big businesses given the reduction in corporation tax revenue from last year. There is genuine public anger and frustration because there is an impression that rigorous action is taken against ordinary people and small businesses and British companies based wholly in the UK but, apparently, lenient treatment is given to big corporations, of which almost half have a head office overseas.
HMRC considered that it had a well-resourced unit bringing in very significant amounts of money; for the 770 largest businesses it had 1,200 staff and was able to draw on expertise across the Department, for instance 65 transfer pricing experts. HMRC told us that it had the right talent: many of its staff resist offers from firms and are motivated by the public service ethos. We were sceptical of these claims.
For which reason they were worried. As they noted:
HMRC acknowledged that it has to maintain broad confidence and credibility in its administration of the tax system to maintain the very high levels of compliance that there is in the UK.
But as they said, in the case of large companies:
We were not convinced that HMRC has the determination to robustly challenge the practices of these companies.
The implication to the Committee was clear. Compliance is at risk.
None of which is any surprise to me, at all. Everything noted is, after all, entirely consistent with what I and the Tax Justice Network have been saying for many years now. But there is a difference. Now politicians are realising we are right and that there is a need for change. I don't guarantee that change will happen. But the omens are good right now. And this committee has done sterling work simply in drawing such criticism out into the open. Now it's time for action. I'll turn to that issue in another blog.