I am aware that many loyal readers have regularly posted comments on this site expressing their views that the government intends to privatise HMRC.
Up until now I have been of the view that privatisation was unlikely:
1 The issue of confidentiality of taxpayer's tax affairs would be very difficult to entrust to a third party (although, as loyal readers will point out, to some extent their parties do have some access to this eg the datagate fiasco was blame on a third party).
2 The political cost of privatising HMRC would be too high, ie there is insufficient support for such a move.
However, based on a recent announcement about a pilot for the outsourcing of text credits debt, it may be that I am wrong and that there is a "plan" (albeit a very "woolly" one) for step by step outsourcing.
The Low Incomes Tax Reform Group (LITRG) issued a press release last week noting that people with tax credit overpayments may in future be dealing with third party debt collectors:
"The Government announced yesterday that they are to conduct a payment-by-results pilot on outsourcing the collection of tax credits debt. This could mean that people with overpayments of tax credits will be dealing not with HMRC directly, but with debt collectors who will be paid by results, and who may therefore be tempted to be less than scrupulous in the methods they use.
Robin Williamson, Technical Director of the Low Incomes Tax Reform Group, commented:
“Tax credits overpayments are not due to claimant error and fraud alone. They arise also from official error, and a certain amount of claimant error is generated by wrong information from government sources.
“Also, because tax credits are a system in which payment is made on a provisional basis while entitlement is decided at the end of the year and adjustments then made, overpayments and underpayments often arise naturally as an integral part of the system. They are an inevitable feature of the design of tax credits. We must seriously question whether dealing with tax credit overpayments just like any other debt, by outsourcing recovery to commercial debt collectors, is an appropriate or proportionate response to the problem.
“If HMRC persist in this course of action, they must take great care to impose the same standards and safeguards as they would themselves when recovering these highly sensitive and untypical debts. The debt recovery arm of HMRC has published specific guidance on tax credits debt which has been developed over the last couple of years. It ensures that people’s circumstances are taken into account in order to set realistic time-to-pay arrangements and that those without the means to pay are able to have their debts suspended or written off in accordance with their needs.”
Notes to editors
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes."
Tax does have to be taxing.
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