The Telegraph reports that HMRC faces a Herculean challenge of around 41,000 avoidance cases, relating to mass-marketed schemes used by individuals and small businesses, with no clear strategy on how to tackle the problem.
In the tone of a schoolmaster berating a lazy pupil Amyas Morse, head of the NAO stated:
“HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes.”I have to confess that a handful of my school reports sometimes expressed similar sentiments about the need to "try harder". Such sentiments are all very well, if the hapless pupil has the interest/will/understanding/resources etc of how/where to try harder.
However, I am of the view (as expressed many times before) that the rise of avoidance schemes is a result of the increasing complexity of the tax system; the responsibility for which rests in the hands of our "respected" members of parliament.
Morse went on to say:
“Though its disclosure regime has helped to change the market, it has had little impact on the persistent use of highly contrived schemes which deprives the public purse of billions.”
Rules requiring disclosure of certain avoidance arrangements have unearthed
more than 2,000 avoidance schemes. The DOTAS regime has led to nearly 100 tax law changes, but leaves
HMRC on the back foot while new schemes are designed to circumvent the revised
law enter the market.
As I noted only a few weeks ago, it is all very well blaming HMRC for everything that is wrong with the tax system in this country. However, whilst there are some aspects that clearly fall under HMRC's remit (eg procedures/administration), as I have stated many times before the buck stops with Parliament:
- It is Parliament that drafts the legalisation that is blamed by the NAO and MPs for "allowing" tax avoidance to occur.
- It is Parliament that drafts the legislation that makes the UK tax system unfeasibly complex and nigh on impossible to understand.
- It is Parliament (dare I mention wee Gordon) that merged IR and Customs, thus bringing about this buggers' muddle that is HMRC.
- It is Parliament that decrees HMRC must cut its resources.
- It is the government that has failed to make a single minister responsible for HMRC.
Therefore, ultimately, who is to blame for the mess that NAO (and PAC) are complaining about?
As ever views, comments and opinions are always welcome.
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"HMRC must push harder..." FFS we are not talking about constipation, conception or childbirth here!
ReplyDeleteCriticised by "hay less horse" and the NAO, the Muppets must be falling over themselves offstage and laughing all the way to the offshore banks.
It is reported elsewhere that the backlog will take decades to clear even with Tribunals sitting nights and weekends.
HMG needs to act responsibly with emphasis on society not greed.
Apologies for hijacking this thread but it looks from this article as though Pavitt is off to Aviva in January
ReplyDeletehttp://www.computing.co.uk/ctg/news/2226947/hmrc-cio-phil-pavitt-leaves-for-new-role-at-aviva
http://www.zdnet.com/uk/hmrc-it-chief-to-leave-for-insurance-giant-7000007827/
Wise man, getting out before the RTI and UC crap hits the fan next year.
The revolving door revolves once more, what was his job again, was it the same Phil Pavitt mentioned in
Deletehttp://www.cio.co.uk/opinion/chillingworth/2009/06/03/hmrc-have-the-right-man-for-the-job/ - dated 03/06/09?
"...the staff at HMRC should be cheered. They've had a bad time recently, and as a user of their online self assessed tax service this year, I can vouch that they are delivering improvements, so with Pavitt known for re-motivating teams and a believer in "empowerment" they should be looking forward to new leadership."
So, there we are, job done, off to Centrica to Feck that up next?
"As ever views, comments and opinions are always welcome."
ReplyDeleteAlways happy to oblige!
"It is Parliament that drafts the legalisation that is blamed by the NAO and MPs for "allowing" tax avoidance to occur."
Did the NAO report actually blame the legislation? Having said that, yes, some avoidance seeks to exploit real weaknesses in legislation. Many other schemes, however, attempt to exploit weaknesses which don't exist (as evidenced by HMRC's success rate when avoidance schemes go to litigation).
"It is Parliament that drafts the legislation that makes the UK tax system unfeasibly complex and nigh on impossible to understand."
This is an interesting one. The best commentary I have come across on it was in a 2010 Radio 4 Programme called "Evan Loves Tax", which unfortunately doesn't seem to be available online. If I find it I'll post a link.
Tax legislation is complex, but:
1) It's not that complex. If you're a company just making and selling widgets, the tax regime with which you have to comply hasn't actually changed much over the years. It's when you start doing exotic things (which the vast majority of individuals and businesses don't do) that things get trickier.
2) Where complexity has increased, much this is driven by the world becoming a more complex place. For example, the rise of the City of London banking sector has had a huge impact, as has globalisation. The variety and complexity of the transactions that tax law has to accommodate has thereby grown massively. Also, if one looks at the number of pages of legislation as a measure of complexity (which is very, very crude but is at least a start), then much of it is anti-avoidance legislation, so there is a chicken and egg relationship going on too.
3) However, governments are not good at reducing complexity, largely for political reasons. The obvious example is National Insurance. The contributions principle is pretty irrelevant now, so you could simply things a bit by merging NI into Income Tax. However, this would instantly produce headlines about how the government was putting 10p on income tax and hammering pensioners. Few politicians have the courage.
"It is Parliament (dare I mention wee Gordon) that merged IR and Customs, thus bringing about this buggers' muddle that is HMRC."
This is of course heresy around here, but I genuinely think merging IR and HMCE (or at least the parts of the latter that deal with taxes) was a good idea. There are clearly massive overlaps between the sort of thing you have to do to administer VAT, for example, and direct business taxes. That isn't to say that the merger has been managed well, of course! It was certainly rushed, for a start.
"It is Parliament that decrees HMRC must cut its resources."
Well, it's the government, but otherwise yes.
"It is the government that has failed to make a single minister responsible for HMRC."
This is an interesting one. Do you think it would actually make things any better? HMRC is directly accountable to Parliament, which in practice means it's accountable to committees like the PAC. Why do you consider that having a single minister (whose meetings with the permanent secretaries are less likely to be minuted than those of the PAC etc) responsible would help?
The counterargument to having HMRC accountable to a single Minister is that would increase the risk of political interference. A large part of what HMRC does is law enforcement and the fear is that having the organisation too close to a small number of individual politicians would give the latter the opportunity to interfere with individual investigations (to settle scores etc).
Perhaps a solution would be to make the Lin Homer role (which focuses mostly on administration) accountable to a Minister, while the Edward Troup role (more focused on law enforcement) remains directly accountable to Parliament?
Stew G