Oversight of HMRC

Their Lordships on the economic affairs committee have mounted the anti avoidance bandwagon, and have said that tax avoidance by multinational companies was too easily carried out and ‘this damages the economy and undermines trust in the tax system’.

As noted before, HMRC and the "evil" companies that seek to avoid tax have to operate within the legal framework created by Parliament. However, the committee have ignored that point and instead have opted to blame HMRC in a report entitled "Tackling Corporate Tax Avoidance in a Global Economy: Is A New Approach Needed?"

Public Finance quotes from the report:

"There needs to be better parliamentary oversight of HMRC, so that the public can be confident that tax deals it agrees with multinational companies are appropriate.

The committee is concerned that HMRC may not be assertive enough in these negotiations."

The solution proposed by the committee is for the formation of a joint committee of MPs and peers which could, if necessary, take evidence in private to avoid claims by HMRC that it could not be held to account over individual deals because of the confidentiality of companies’ tax negotiations.

That's all very well, if the evidence taken could be guaranteed not to leak. However, given that the committee would be made up of politicians, there is every likelihood that it would leak.

Committee chair Lord MacGregor also wants large firms to publish a summary of their tax returns ‘so the public and media and ensure they are paying their fair share’.

Define "fair share" in the context of our massively complex tax system which very few people (HMRC and tax professionals outwith HMRC) actually understand ?

The committee also urged HMRC to end its practice of using staff seconded from leading accountancy firms to help design taxes.

"The risks are two-fold: that those on secondment will not have any incentive to design robust, hard-to-avoid taxes, and that when they return to private practice they will be better placed to advise how to exploit loopholes.

We recommend that the Treasury and HMRC should be better resourced to design and implement taxes, without undue dependence on short-term professional advisers."

In other words the committee wants HMRC to operate within a bubble, avoiding any contact with the real world!

Regarding oversight, the most effective oversight is that of creating a Cabinet post with specific responsibility for HMRC (ie one where the buck truly stops) outwith the Treasury.

Tax does have to be taxing.

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