I am aware that there are some who think my criticism of HMRC's tax gap report was on the heavy side yesterday. In particular, they have suggested that HMRC's failure to disclose it's headline data was mis-stated was not misleading and that it's estimates are not as inaccurate as I am suggesting.
Despite claims to the contrary I listen to criticism when it comes from people whose opinions I value. So having slept on the issue I reflected this morning on whether there was any of the commentary I might change. I have to say there is not.
First, HMRC should make it very clear when it has restated data. That is the essence of transparency and accountability. To not do so is misleading.
Second, HMRC need to radically transform the way they disclose much of their work. To say, deep down in the notes and in a separate report, that much of the tax gap data is made up of 'illustrative estimates' for which no explanation is provided is unacceptable. The suggestion I have made that HMRC are simply making this stuff up is, in the circumstances, quite acceptable. The FT once made exactly the same observation.
Third, to suggest that there is massive behavioural change, such as a significant fall in tax avoidance, on such as a narrow basis as registration for DOTAS schemes is seriously misleading. That is really poor methodology, and a much broader consideration is needed. To pretend that major companies are not tax avoiding because schemes like those used by Google et al do not need to be registered under DOTAS is deliberately misrepresenting the truth when even the Chancellor says this avoidance needs to be tackled.
Fourth, it remains the case that HMRC surveys the tax returns it gets to estimate its tax gap, so missing tax returns it does not get as a source of tax evasion estimates. Unsurprisingly it massively underestimates tax evasion as a result.
And fifth HMRC persists in only doing top down estimates for VAT, where it finds a high rate of evasion loss, and then refuses to consider this can have any impact elsewhere in the tax system when it is very obvious that if income is being evaded for VAT purposes other taxes simply have to be evaded as well. No one on earth suppresses income on their VAT return and then declares it on their tax return - but HMRC continue to suggest they do, which undermines all their credibility on this issue.
So, I am afraid to say that yesterday's release was fundamentally flawed and after this length of time HMRC have had the time needed to acknowledge the fact and won't. And that's not just irresponsibility on their part it is irresponsibility with a consequence because this country is suffering badly as a result of HMRC's failure to collect tax owing to it. And for that I cannot forgive them because I believe that is a conscious political choice and one that is creating misery for millions in this country.
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How can the BBC News report both that “extra resources” are being given to raise more money and a day earlier report it is continuing forced staff reductions over many regional offices?
i) BBC 17th Oct “The rise [in the tax gap] comes despite HMRC being put under pressure by the Government to raise more money in tax, and being given extra resources to do so.” [1]
ii) BBC 16th Oct “HMRC: More than 90 jobs to be lost in Newry.” [2]
iii) BBC 16th Oct “150 jobs under threat at Welsh tax offices, says HMRC.” [3]
[1] http://www.bbc.co.uk/news/business-29644274
[2] http://www.bbc.co.uk/news/uk-northern-ireland-29650348
[3] http://www.bbc.co.uk/news/uk-wales-29653314
Absurd, isn’t it?
I have to say that I have absolutely no faith in any news reported by the BBC, after their consistently biased slant on the Scottish Referendum, fracking and the NHS Bill masterminded by Lansley. They are not a trustworthy source of actual news sadly.
I think cnisism is always required
You are right about the BBC reporting – they totally understated the amount of jobs going last week in HMRC.
14 sites to close with over 400 jobs and another 900 lower grade jobs being offered a voluntary exit scheme.
Many of the 400 jobs are in compliance – but according to HMRC are not in the right place! – we know there is no local compliance now being undertaken by staff in Cornwall and we believe the whole of the West Country south of Bristol will be without a tax office by 2020.
We haven’t seen proof that the digitalisation programme is working – RTI didn’t prevent over 5 Million incorrect calculations for 2013-14 and who knows where we are with Universal Credit. I am amazed in an election year that no-one is waking up to what is really going on!
Surely even using HMRCs £34billion (or likely to be £119billion using Richards figures) – we should be investing more into recovering and collecting this tax and not keep getting rid of experienced staff (yep I am one of them!).
Thanks Paul
“To pretend that major companies are not tax avoiding because schemes like those used by Google et al do not need to be registered under DOTAS is deliberately misrepresenting the truth when even the Chancellor says this avoidance needs to be tackled.”
By your definition of tax avoidance, Amazon is not tax avoiding. Unfortunately you have this general definition of tax avoidance which you like to hold up as some basic starting point, but you never apply when considering individual companies. The Chancellor knows very little about tax, he’s just playing to the public gallery in making such comments.
How many errors can you make in one comment?
So many it’s not worth responding
With property taxes generally, even if they aren’t being successfully collected, at least you know how much is owed and by whom. That’s why land value, in particular, should become the biggest tax base.
Richard, I apologise if it’s not strictly in keeping to the conversation but as a function of HMRC’s failure this following bit of info came out of Sheffield council’s cabinet meeting Wednesday just gone – “chilling future for the city’s budget in 2015/16. The indications are that the Government grant to Sheffield for next year will drop by £45 Million or 29% and the projected shortfall in the city’s budget would consequently be some £38M.”. There’s a blog by my partner who has been attending Sheffield council meetings and this bit of news went down like a lead balloon – http://thepublicinterestsheffield.blogspot.co.uk/2014/10/sheffield-city-council-cabinet-meeting.html
It’s impossible to run organisations on that basis
But the Council will be blamed, of course
Not only do I agree 100% with what you say, I might even go further.
But what to do about it? I am waiting for the day when you lead a broad based campaign to reform HMRC. Believe me there are many in the Tax profession itself
who see the need. I don’t want to keep knocking Left Wing Reformers, (much as I like too!), but the campaign does need broad support, because taxation only works with at least some level of voluntary compliance from taxpayers, many of whom of course may not be Left Wing.
Some thoughts next week then