The Economics of The Madhouse

The internal chaos within HMRC over restructuring and job cuts seems to be affecting not just the efficiency of HMRC, wrt answering taxpayers queries and processing claims etc, but also HMRC's ability/desire to collect tax revenues.

It seems that, as a result of a shortage of tax collectors, the taxman is not chasing tax debts of up to £20K.

Over the last year the number of tax collectors has fallen from 8,700 to 8,000. As a result of Gordon Brown's "efficiency" drive there is no money available to hire replacements.

Therefore HMRC are "cutting their cloth to suit their budget", and focusing their resources on collecting only the larger tax debts.

Mark Serwotka, leader of the Public and Commercial Services union that represents tax staff, questions the costs and benefits of the "efficiency" measures introduced by Brown. He is quoted as saying:

"This really is the economics of the madhouse. It is ludicrous that tax that could fund vital public services is going unpaid because of arbitrary targets to slash jobs. The priority of HMRC and the Government should be ensuring the integrity of the tax system and that everyone pays their fair share."

A memo from senior managers in HMRC's debt management office details how tax collectors are prioritising debts of over £20K on income and corporation tax, and £15K on VAT and PAYE underpayments.

The HMRC document states:

"We are aiming to reach a stage where all debts over £10k are actioned, without delay."

The reality, according to sources talking to Financial Mail, is that this is unlikely to happen in the foreseeable future. HMRC sources have told journalists that any debt of less than £20K was not being pursued.

HMRC dispute the leaks and state:

"HMRC continues to pursue all debts and collects tax as it has always done."

Well, they would say that wouldn't they?

I would draw HMRC's attention to this comment, that was made here a few days ago:

"I've been in HMRC over 20 years and have never known it as bad as it is now. Thankfully, I'm getting out.

The new CIS system is an absolute shambles and we have been told not to chase outstanding employers returns because they are classified as low priority.

In addition, we have been instructed to not bother putting any cases into court with a monetary value of less than £3000."

The questions that Brown and his sidekick Darling need to ask themselves are these:

1 Is the restructuring improving the efficiency and effectiveness of HMRC?

2 Is HMRC a worldclass organisation fit for the 21st century?

Tax does have to be taxing.

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