Yesterday's PAC exchanges were not the best. And they did not always hit their mark. And yet some fascinating insights came out.
For me one of the most striking was Lin Homer, CEO of HMRC, saying that HMRC had directed those they were investigating towards the Liechtenstein disclosure arrangement.
Why did they do that? Because that offered them two massive advantages. The first was almost no risk of criminal prosecution. And the second was penalties of no more than 10% in most cases when rates of 30% remain commonplace for simple mistakes made by taxpayers in the domestic economy.
My question is a simple one, and is whether or not it is the job of HMRC to help tax evaders mitigate their risk of tax penalties.
I would very strongly suggest it is not. That is for their advisers to do. I have certainly never seen it and have done my fair share of tax investigations in my time.
But, apparently if you're an offshore evader they go out of their way to help.
Why is that?
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“Lin Homer, CEO of HMRC, saying that HMRC had directed those they were investigating towards the Liechtenstein disclosure arrangement.”
This is all the result of weak leadership, I think it is quite obvious that Liz Homer is a mere puppet and the “Big 4 and Big Business” have far too much influence over HMRC. There is a sickness in that department that wasn’t there twenty five years ago, which needs to be purged.
Unlike her predecessor, who provided strong leadership to achieve his objectives and is now securely back in poacher mode.
Do you mean “evaders” or “avoiders”?
Even I, as a non-economist know that there’s a huge difference 🙂
Evaders
Thank you. One of your fans has been trying to convince me you meant avoiders!
Neil is a right-wing troll. I’ve already given him this reply on Facebook: The point is that HSBC didn’t know whether it was evasion, avoidance or neither and didn’t care, which makes it an ethical issue – particularly for the Rev Green.
I confused MrT’s comment ‘evaders or avoiders’ with the ‘non-dom blog. Since the answer is clear in the title it’s merely a case of a right-wing troll seeking to trot out the tiresome ‘but avoidance is legal’.
Indeed there is a huge difference. It is not at bottom a legitimate difference, however. The scandal is not so much those who break the law, but the law itself. As with politicians expenses etc, what sickens is what is legal. Sure, there may be some grey areas which can keep accountants and lawyers busy earning fat fees. But it is not hard to deal with this. The DWP deals with it all the time with no difficulty. Let the tax law be written in the same way and much of that artificial advantage will disappear.
I do not see what economists have to do with it, really
Two words, Richard, “relationship management”. Sorry to repeat what I noted a couple of days ago, but that’s the overarching policy and practice under which this approach is justified (leaving aside of course, the ideological bias of many/all of those who make up the senior management and Board of HMRC). If anyone from HMRC is still able to read your blog (I suspect their system administrator now has a trace on all of the non government urls/links staff are connecting to, so it may well not be possible without attracting disciplinary action) they can correct me if I’m wrong, but I’d assume that the units dealing with high net-worth individuals, and big business are both products of the adoption of relationship management. That those relationships have clearly been ranked as more important/valuable, than ordinary (eg. PAYE) taxpayers and small/medium sized enterprises has been evident for some while but is now laid bare for all to see.
Speaking as a student of public administration and public policy of many years, and someone who spent the initial years of my academic career teaching the subject to undergraduates (a good number of whom went into the civil service), and as someone who has more recently taught fast track entrants, I find it deeply depressing that contemporary versions of an honourable profession have become so warped and corrupted AGAINST what is in the public interest, and FOR the interests of a wealthy minority.
Over the past decade politicians of all parties, but Tories in particular, have spoken frequently about the public needing to understand what their responsibilities as well as their rights are, and thus use this to govern our actions in a way that serves a broader public interest. Sadly, it’s clear that we’ve now hit a point where public servants are now longer willing or able to make such judgements, and that the culture of public service, particularly at senior levels, has become increasingly warped and corrupted in this regard. We hear much talk about the need to restore trust in our politicians. But it’s clear that we also now need a movement to restore trust in our public servants – and particularly those in senior positions whose actions and personal values and biases shape and constrain the policies and actions of their organisations. That is also a requirement that should extend to any individual/organisation contracted to provide a public service. In short, we need cultural change that reintroduces the responsibilities and ethics of being a public servant and, most importantly, their responsibility to act in the public interest. As with the NHS, this then needs underpinning with a policy and practice that ensures people are able to act and think accordingly. Unless and until this happens public administration in this country is locked into a decent into the same mire of questionable practices, cronyism, deceit, and shame that increasingly afflicts our political class and, by definition, the puppet masters so many of them serve.
Depressing
But agreed
I watch part of the PAC on Parliament TV. The politicos came across as very frustrated – they sensed that “bad things” had happened – but appeared to have no way to address them. Hodge was quite irritable (but also grandstanding).
Homer came across as a “jobs worth”. Following the rules & claiming to be doing her best but not forthcoming in the least. For example, the PAC regularly returned to “why was only £135m” collected. Homer could have said “loads of new non-doms” etc but did not volunteer this info (which I only picked up in the Guardian today). Given this, Homer is part of the problem. She could have said “in the 2000s the rules on non-doms was changed and this resulted in many of the accounts that would have been open to tax recovery being not open etc etc”. Homer, HMRC, part of the problem.
Agreed
If HMRC has already started a COP9 enquiry, i.e. an investigation into suspected tax fraud, then the LDF is not available.
“My question is a simple one, and is whether or not it is the job of HMRC to help tax evaders mitigate their risk of tax penalties. I would very strongly suggest it is not.”
The LDF exists and is part of government policy. It would clearly be idiotic if HMRC did not notify taxpayers of its existence.
HMRC also has information on penalties on enquiries and how to mitigate them and of course makes sure taxpayers are aware of them to.
It’s like the police reading someone their rights.
As always you try to make something routine and obvious seem somehow sinister.
I have never seen HMRC tell a peson to claim an allowance they missed. They would not say it was their job to do so.
So why this help to tax evaders? It’s a wholly fair question
“I have never seen HMRC tell a peson to claim an allowance they missed.”
I have. On many, many occasions. It is part of HMRC’s training. It is part of reporting within HMRC that taxpayer positive adjustments are reported as well as taxpayer negative adjustments. It is HMRC’s job to ensure that the right amount of tax is paid, not the most.
So your question is without merit. HMRC’s duty is to implement to law and practice as decided by the government, not to sneakily withhold beneficial information from taxpayers.
Are you suggesting that they should withhold such information?
I sometimes wonder at how much interaction you actually had with HMRC when you still worked as a practicing accountant if you never had a helpful HMRC member of staff.
I am sure you have
Why do I doubt you?
Interesting. It is never the DWP’s responsibility to draw claimant’s attention to benefits they are not aware of. Why are is it so different for taxpayers, many of whom have expert advice, unlike claimants. One law for….
Quite
It certainly seems like it to me.
If the argument behind this is the so called ‘trickle down’ effect (the wealthy are supposedly wealth creators because the money they are allowed to keep apparently is used to create more business etc) – then lets see the figures, say how much money the evader has created versus what their tax bill would be if they declared everything above board.
Also, lets see how the tax take from that is distributed – from VAT at the purchase stage to wage taxation etc.,, taking benefits for low pay into account etc. We would also ned to trace what happen if the lost tax is just moved sideways into other investments.
Some case studies might help because I think that the system as it is will still deliver more for the tax evader than society as a whole.
That’s the hypothesis – can it be tested?
With time, which I not know yet
PaulB is correct – when I worked in HMRC we had to identify the right tax at the right time – whether it was in the taxpayer or HMRC’s favour. That said there was a culture and may still be – I do not know – within the Large Business Service of “customer facilitation” and “helping” the customer to get things right rather than agressive investigation of wrong doing which is perhaps what should have been happening. Much of it goes back to the merger of HM Customs and Excise with the Inland Revenue. Customs staff were much more “agressive” and vigorous in their pursuit of evaders, whereas the Inland Revenue adopted a more “gentlemanly” approach and unfortunately they were in the majority at the time of the merger and made up most of the senior management and this has clearly sown the seeds of having people like L Homer in charge who seem unwilling to be fully committed to the diligent pursuit of wrongdoers.
I think you will be hard pushed to find many under self assessment saying HMRC fulfil the brief you describe
Closing the Enquiry Centres is clear evidence of that
From my point of view opening the enquiry centres in the first place is also clear evidence of that. “Enquiry centres” are reasonably common in a lot of public agencies now, and they are pretty much call centres. Call centres do not help: they keep you hanging on the phone for ages because your “call is important to them”. When you do get through the person on the other end has a script and pretty much sticks to it no matter how irrelevant to your enquiry. The people who staff them have little knowledge, and you cannot normally speak to anyone who does have knowledge, because such people do not speak to the public.
Before this “reform” one could contact HMRC, or DVLA, or whichever agency you needed to talk to, and get someone who dealt with enquiries as part of a wider job which meant they had a reasonable grasp of both law and policy. You could also speak to a tax inspector if necessary, and that inspector was at least technically trained and often fully trained.
Is there anyone in the country who thinks call centres are an improvement on anything that went before? In any field? Well I think McKinsey partners do: who else?
I find HMRC staff to be very helpful, too.
Sometimes they’re frustrating, I admit, but generally very helpful. Just the other day, for example, they offered to code out an underpayment of tax for someone that I was expecting they would insist on being paid immediately (well, 30 days). Not a big thing, but very nice 🙂
I just wish there were more of them, especially at the trained end.
Agent Account Managers are excellent, by the way. A very good thing indeed.
I never doubt most HMRC staff are good
Their leadership is poor
They have insufficient resources
They could do a great job
They need to be allowed to do it
Hello Richard. Haven’t been on here for a while. I’m Sick of reading inaccurate reports in the press regarding tax. As Senior HMRC officials explained to the House of Lords Economic Affairs Sub Committee on the 4th of Feb 2013 (available to view online) tax planning is paying less tax by arranging your affairs in line with the purpose of the law (such as an ISA), avoidance is using a law to not pay tax even though that law wasn’t intended for that purpose, aggressive avoidance is going an extra crooked mile to twist the law to avoid paying tax and evasion is blatant fraud. On top of that Company Directors are obligated by law to pursue the best interests of the company and shareholders by obtaining the lowest tax bill (a fact made clear on HMRCs website). Shareholders and particularly pension funds all benefit from companies with low tax bills i.e those who avoid tax. Quite simply all tax abuse can all be dealt with using legislation (politicians) or the courts (HMRC). Its not rocket science yet the reality is that all the political parties are too busy trying to score hypocritical points against each other whilst failing to understand the mechanics of the issue. Meanwhile HMRC is populated with incompetent officials and the major accountancy firms (who have all the best talent because they understand the principle of rewarding results based performance) run rings around Whitehall exploiting loopholes for their clients . Even the press are only interested in supporting political perspectives on the issue meanwhile the tax payer loses money due to the simple fact HMRC do not do their job properly and politicians are either too stupid or too wrapped up in their own party political agenda to co-operate. Did HMRC tell ministers about the HSBC leak ? If they really did wouldn’t they name those ministers rather than sit and take body punches from Margaret Hodge ? Tune in on March 4th for the next episode of ‘Carry on Tax Collecting’.
Sorry forgot to add…I’m sure there are good people in HMRC but I bet they don’t hang around long in a culture that doesn’t allow them to do their job. No wonder so many leave to the major accountancy firms.
Oh and not so much the Reverend Green from Cluedo but the Reverend Green from Clueless