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Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.
Thursday, 22 December 2011
The HMRC and PAC Pantomime
My thanks to a loyal reader who provided me with a copy of HMRC's 20 point rebuttal (can I use a word that contains "butt" before 9PM?) of the Parliamentary Accounts Committee savaging of HMRC's performance.
I am glad to see that HMRC and PAC are entering into the spirit of Christmas, and indulging in some traditional Panto:
- "Oh no we didn't!"
- "Oh yes you did!"
"20 things the Public Accounts Committee got wrong.
Today, there is media coverage on HMRC and its large business tax settlements.
While the Department provided journalists with a full briefing, many of the errors came from the original report, which HMRC says is based on ‘partial information, inaccurate opinion and some misunderstanding of facts’.
Here are 20 things the Public Accounts Committee (PAC) got wrong:
1. There are systemic failures in the way HMRC manages tax disputes A mistake was made in one settlement and we have explained how this happened. This is not a systemic failure. In fact, our large business strategy is now being adopted by other tax administrations around the world, including the United States of America.
2. There is more than £25 billion outstanding in unresolved tax bills The figure quoted is not tax owed. It is a ballpark estimate of maximum potential tax liabilities, before a full investigation of the facts and before any reliefs or allowances are applied. This figure is actually known as ‘tax under consideration’ – in many cases, when we look at all the facts, it becomes clear there is nothing to pay. We told the PAC this. Twice.
3. Millions of pounds are being lost to the public purse Last year, we collected £468 billion, including £13.9 billion through compliance work. We told the National Audit Office about one mistake, which the NAO estimated was worth between £5 million and £8 million.
4. HMRC’s relationship with big business is far too cosy It is quite wrong to suggest that we are soft on large businesses. They account for 60 per cent of the UK’s total tax receipts. What’s more, around half of the additional £13.9 billion HMRC brought in through compliance work came from large business.
5. Large companies receive more favourable treatment than ordinary taxpayers We treat all taxpayers even-handedly, supporting the majority who comply with their duty to pay their taxes, and cracking down hard on evaders, avoiders and fraudsters. Our handling of large business settlements is tough but fair.
6. Large companies have longer to pay (up to ten years) than smaller ones Generally, time to pay is given more often to smaller businesses and for longer periods of time. Large business debts are dealt with using the same criteria that HMRC use for any other business. In fact, large debts are pursued very quickly: it is the size of the debt we look at, not the size of the business. If a business owes us a large amount then we may ask for an Independent Business Review before considering a Time to Pay agreement.
7. HMRC’s mistake led to £20 million of interest not being collected A mistake was made in one settlement. We brought it to the attention of the National Audit Office, who estimated the error as being between £5 million and £8 million. There was no attempt to hide anything, and we do not agree the £20m figure.
8. HMRC deliberately decided to withhold information which it could have disclosed to the committee There is no express power for HMRC to disclose taxpayer information to Parliament. Parliament itself wanted to keep taxpayer information out of the political arena when it passed the confidentiality provisions we are bound by. In our view, disclosing confidential taxpayer information in a public forum, even in evidence to a Parliamentary Committee, would be unlawful, because it would hinder rather than help us in our function of collecting tax.
9. There is less justification in keeping tax information confidential about large business than small businesses or individuals We have a statutory duty of confidentiality, which is central to maintaining confidence in the tax system. The requirement for taxpayer confidentiality is underpinned by a criminal sanction. This is so that taxpayers (whether large or small) are not inhibited from full and frank disclosure of their affairs. Large business tax settlements are a vital part of how HMRC secures tax revenues for the country and without them Britain’s public finances would be seriously damaged. The legislation that binds us makes no distinction between types of taxpayer – whether it’s an individual or a large business.
10. The PAC have to find out about cases that concern them through the media This is not correct. Parliamentary scrutiny by the PAC is delivered via the National Audit Office – which has complete access to all of our paperwork. Many of the reports in the media are inaccurate and misleading. It is a source of great frustration to us that, as a result of taxpayer confidentiality, we are unable to correct them.
11. Senior officials failed to answer questions before the Public Accounts Committee in a spirit of openness Dave Hartnett and Anthony Inglese provided as much information as they possibly could, within the constraints of taxpayer confidentiality under which they work. The National Audit Office has had complete access to all of our paperwork.
12. HMRC does not take legal advice before reaching settlements In many cases, any legal issues are well understood by the tax professional involved who have no need to involve lawyers. It is important to remember that almost all tax work in HMRC is delivered by our tax professionals and it is tax professionals who often instruct Parliamentary Counsel in the preparation of legislation. Often, cases hinge on questions of fact or accountancy – not law. In these cases, the tax professional leading the case does not need input from lawyers. Almost 99 per cent of all tax disputes are settled by tax professionals.
13. There is little or no sense of personal accountability or responsibility for serious errors Our commissioners are accountable. Our former Chief Executive, Permanent Secretary for Tax and Directors General have all been publicly held to account by both the PAC and Treasury Select Committee in recent months.
14. Not enough attention was paid to the risks that hospitality may result in the perception of a conflict of interest The senior leadership of HMRC is completely transparent on this issue. We have strict rules on acceptance of hospitality underpinned by guidance for all to see. Details of hospitality received are published quarterly on HMRC’s website. Most of the hospitality received by Dave Hartnett involved him representing HMRC or speaking on behalf of the Department. It’s absurd to think senior officials would be swayed by a glass of wine and a plate of canapés.
15. Dave Hartnett was personally involved in settling the tax dispute referred to by the PAC Our Permanent Secretary for Tax was only involved to broker a relationship issue.
16. The decisions made in the four large tax cases the PAC refer to were not sound As part of the 2010-11 annual report and accounts process, the National Audit Office looked at our processes for resolving tax disputes with large businesses. They endorsed our governance arrangements for large business tax settlements.
17. HMRC have very few people with “deep knowledge of tax affairs” We have more than 15,000 people working in tax professional roles here in HMRC. Most are expert in tax law and more than 2,000 have completed our four-year tax training and development programme. Our Tax Academy will ensure that we have the right number of tax professionals going forward.
18. We are the only country that has this problem. Other countries don’t have problems over taxpayer confidentiality Taxpayer confidentiality is a legal requirement in the UK, and a fundamental principle in tax administration across the world. We hold by our view of the law, which means we were unable to provide the Committee with all the information it requested.
19. HMRC has suspended the whistleblower Nobody has been suspended. Neither has anyone been disciplined or threatened with dismissal. We are investigating the circumstances around the publication of legally-protected and confidential information. This investigation continues.
20. Parliament needs assurance that these settlements are appropriate and good value for the taxpayer Parliamentary scrutiny is delivered via the National Audit Office – which has complete access to all of our paperwork. Our officials always answer questions as fully and frankly as they can, within the legal framework we work under. HMRC welcomes the further enquiries to be made by the NAO with support from a retired High Court Judge as an opportunity to confirm this and clear up the myths about foregone millions."
Twenty miles to London, and still no sign of Dick!
Merry Christmas folks!
Tax does have to be taxing.
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