The National Audit Office issued a report on the work of HM Revenue & Customs yesterday. I am sure it was not their intention to do so, but in the process they proved precisely why we need an Office for Tax Responsibility.
Whilst I am sure it is competent within itself there are three fundamental flaws with the NAO report.
The first is that it is issued by a former global managing partner at PWC, Sir Amyas Morse. With respect, a man who headed an organisation that engaged in industrial level global tax avoidance of which he must have known and from which he must have profited is not fit to to head any public body, let alone one tasked with any matter relating to deciding whether HMRC is doing a good job or not.
I note the FT says of the NAO report this morning:
The tone of the report was strikingly positive, given that the Revenue has faced frequent criticism from MPs and others.
I cannot help but think that from the perspective of a PWC partner HMRC is doing just fine in not collecting tax, and that by itself discredits the report.
Second, the report supposedly looks at HMRC's "progress towards achieving its primary objectives of maximizing revenue and making sustainable cost savings." Staggeringly, it does not in the process examine issues relating to the calculation of the tax gap. It only mentions the issue twice, and then only in connection with the sum estimated for tax avoidance by HMRC. It has clearly not therefore tried to estimate whether or not HMRC have correctly calculated the maximum revenues it might collect and as a consequence all the conclusions that follow in the report are bound to be wrong. If you do not define the audit population correctly, as the NAO has clearly not done, then you cannot draw proper conclusions. This is a failed audit in those terms.
And third, the NAO says HMRC is failing in its customer service but seems to make no link between that and the success HMRC is having in cutting costs. If the NAO were truly independent as it claims I do not see how this link could have been missed.
The NAO is not fit to audit HMRC on the basis of this evidence. We need an Office for Tax Responsibility to do the job. And it must not be captured by PWC and the other members of the Big 4 accountancy oligopoly.
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As far as I’m aware, Richard, the findings (or at the very least, the wording of the findings/conclusions in the final, published, version) of all NAO reports have to be agreed with the entity being audited. I stand to be corrected but that was what I’ve been reliably told on a number of occasions.
As I also understand it, that’s not a million miles away from how the audit of a large organisation is undertaken is it? A senior partner/auditor meets with senior management and agrees the outcome of the audit and then the audit team (suitably briefed) go in and deliver the required audit. Obviously you’d know far more about this than I would, so I may be wrong, but certainly I’ve heard that from people directly involved in such a process so I assumed it was correct.
Of course, if the processes are as noted above it certainly raises questions about the credibility and value of whatever might be produced, as you note with regard to the NAO.
That’s pretty much the way I suspect it works
I agree with your observation of the vulnerability of a body such as this to crony interference as you describe.
How would you propose overcoming it, assuming they same old faces would swarm around this like bees around a honeypot?
What sort of person (name names if you want, otherwise by characteristics) would you think would be fit for board/senior management roles in such an organisation?
The essential element is to have a board that is widely based
So it has to represent the whole of society
At present it does not
With a powerful, paid, board those who work in the place can be kept in line
Without it they can’t
Who? Senior academics
Medics
Trade unionists
Charity heads
A civil servant or two
Business – yes – but as individuals
And no reason why not an auditor or two – but maybe someone who has taught it, and not practiced for a firm recently
And a small business rep
You get my drift?
Lots of experience – but not business insiders all of them, by a long, long way