As the FT noted a couple of days ago:
The number of HM Revenue & Customs investigations into serious tax fraud and avoidance has fallen to a six-year low, figures uncovered by the Financial Times have revealed.
Known in tax circles as Code of Practice 8 and 9 cases, the number of investigations fell from 1,091 in 2022-23 to just 480 in 2023-24.
Cop9 investigations, which involve the most serious cases of tax fraud such as that of Bernie Ecclestone, fell to just 268 in 2023-24 — down from 669 in 2018-19.
This is a disastrous downturn, with the base figures themselves being down from earlier periods.
Why is it happening? The opinion is, based on all reports I can find, and with which I concur (I finished my last big tax investigation case less than a year ago), that it is a lack of investigation staff at HMRC that has led to this situation arising. There are just not enough staff being trained and then retained to undertake the required number of tax investigations.
There are three problems resulting from this.
The first is that it is likely that insufficient tax is being recovered.
The second is that the necessary deterrent effect that a steady flow of investigations supplies is not being created.
Third, there is the problem that those officers now engaged in investigations are so overwhelmed with work that they cannot train the next generation of investigators, meaning that the situation can only get worse.
As I suggested in the Taxing Wealth Report 2024 (section 15.4 of the full report), this situation has arisen for three reasons.
Firstly, HMRC is not treated as an enforcement agency but as a spending unit by HM Treasury, and as such, until very recently (and Labour has begun to change this), significant cuts have been imposed on it.
Secondly, HMRC has been run by a board of directors who are not fit for purposes, many being drawn from the private tax advice industry, with obvious conflicts arising.
Third, HMRC has been run as if it is a public limited company and not as if it is a service, which includes the service to the community of eliminating tax cheating.
Labour has given HMRC new funding for 5,000 new staff, and that is welcome. But the other problems are not, it seems, being addressed. In that case, they will continue.
It baffles me that politicians who claim that they need tax to fulfil their spending commitments (when that is not true) do not put much greater emphasis upon the importance of tax collection - which I see as vital as a way of delivering social policy via taxation, and for the control of inflation.
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Two points I might make,
Firstly not only have we lost 20000 Police Officers under that last Conservative Government but we have seen the hollowing out of the other ‘Enforcement Agencies’ not only HMRC but Local Authorities, The Traffic Commissioners, The Health and Safety Executive etc with predictable consequences.
Another rather interesting experience having had the builders in recently is that most of them seem to use these accounting packages so are only interested in being paid via BACS as nothing adds up easily otherwise. I dont know if this might be having an impact.
I think the fact they want payment into their bank accounts is great
I have to say, handling cheques these days is really hard
Builders being paid by BACS is no sort of problem I would have thought. The ‘problem’ in terms of tax receipts is the builders who will work for cash only (and the customers who comply with that request/demand). There is always a discount for cash. Who is paying? Somebody is. Society is when all is said and done.
BACS is not an avenue for deceit or fraud is it? Simply a way the recipient knows with certainty that funds have been deposited, as due, in a timely fashion. What’s not to like about BACS? And payment appears in full on the bank statement as HMRC would like it to (if anyone at HMRC gives a toss about about tax receipts).
BACS is good
There is growth in one area though. I am bombarded with emails offering me self-help videos on how to fill in my tax forms (which never deal with the questions I want answered). Years ago I could ring them with form-filling queries. I don’t even try nowadays.
I suppose “we can’t afford it”?
Correct
I am not as baffled by this simply because I see a ‘design intent’ in there to honest.
In some cases – the police – maybe this is about justifying privatisation or promoting the home security sector to make money – but in tax collection and tax affairs I think that it is all for show.
Taxation has been thoroughly discredited – that is why you wrote The Joy of Tax – and like the concept of freedom, the tax system we will get will be the version that suits the rich and not the rest of us actually.
Thanks
PSR, let me finish your sentence for you:
“…….the tax system we will get will be the version that suits the rich and not the rest of us actually”…….and the evidence for this is the fact that
“HMRC has been run by a board of directors many being drawn from the private tax advice industry”
……….so naturally, they will make life easier for themselves and their clients QED.
UK tory governments, corrupt to the very core & arguably (if you accept that tax is a core gov function) a threat to the stability of the Uk state – take your pick – enemy of the state or simply traitors.
How much of it is down to loss of experienced, highly trained staff because of regional centres, lack of pay progression and real term pay cuts?
A great deal is….
I’m baffled that you are baffled. When did the Conservative Government over the last fourteen years, ever actively and vigorously pursue tax avoidance or tax evasion; or provide HMRC with the resources to do its job? I always thought it was obvious that not collecting taxes not raised at source (PAYE,NI, VAT, Customs Duties)* was a neoliberal shibboleth.
* Neoliberalism likes to raise its tax principally from those simply unable to escape its grip; and direct its wrath at various stigmatised “scroungers” at the bottom of the social heap; but not the well-heeled, business-like, successful tax evaders.
But it has got much worse
My lovely wife works for the NHS and tells me that it’s also the case that it’s very difficult to train new nurses due to work pressures.
I too find it baffling. A huge source of revenue that is readily available given the right resources and organisation. Addressing this issue would also send out a strong message that everyone will treated in the same way.
The resources would be self funding and results could be incentivised
After fourteen years of cuts, our public services are in a mess. Who knew eh? Well, not the average Conservative voter that’s for sure. They still voted in Tory govt after Tory govt, and still would have this time if Covid had been handled better, and the Tories weren’t so wedded to small govt that refused to intervene at the start of the cost of living rises rather than the end.
Yet after all these years of cuts, the misery they’ve inflicted, and the dire economic consequences, still people support cuts! To quote mr Fawlty, ‘are you mad?’ Cuts to the HMRC cost billions in lost taxes, both through loopholes and deliberate evasion. Not to mention it takes longer to assess small businesses and mistakes are more frequent. How does that help business?
When health services are run down, local support provided by poor paying, over stretched private companys, people are off sick for longer, and suffer worse illnesses than need be. How does that help businesses?
When Education is privatised, and money is allocated only to ‘successful’ schools, usually in ‘good areas’, meaning thousands of kids are at underfunded, run down schools that aren’t, how does that help businesses?
At the same time Further Education is a shadow of even its Cinderalla past. It offers a fraction of its courses, with a fraction of the staff it had in 1979. Yet govt wants more vocational courses for adults. Where, and when I might ask? Again how has cutting education funding helped business?
Staff have been slashed, courts closed, tribunals shut down, and the probation service decimated. How did any of that benefit society? Not to mention, should your business need to take another to court – good luck finding one.
Then we have the privatisation, tendering out, and of course, cuts across the civil service. How does cuts to services that are meant (quite literally with the DVLA) to oil the gears of society and enable people to get things done, or not as is often the case now, helping businesses?
Only one dept has seen increased funding and more staff – the DWP. Or T4 as disabled groups have named it. And we all know why that dept escaped the worst of the cuts…
The overall point is though, that we need to be getting across to people on the right, in their terms, why it’s so foolish to keep slashing funding to the public sector. And, if argued sensibly it’s quite easy – business suffers from an ailing public sector.