Can HMRC collect tax fairly and effectively?
Susan Cattell highlights the key points of the ICAS submission to the All-Party Parliamentary Group on Responsible Tax Inquiry into public confidence in HMRC’s capability to collect tax fairly and effectively.
The All-Party Parliamentary Group on Responsible Tax (APPG) was established in 2015 to provide a forum for members of parliament and a range of other stakeholders to contribute to the ongoing debate on what responsible tax entails and how it can be encouraged.
The APPG’s second inquiry is into public confidence in HMRC’s capability to collect tax fairly and effectively. The UK tax system depends on a degree of trust and voluntary compliance – coercion alone is not enough. ICAS therefore welcomed the opportunity to respond. Our response concentrated on the need for HMRC to ensure that the service provided to all taxpayers is of an acceptable standard; this is vital if confidence and trust in HMRC are to be maintained.
HMRC has faced considerable challenges in recent years, against a background of significant reductions in its resources. Its remit includes the National Minimum wage, student loan repayments, tax credits, aspects of money laundering regulation as well as more traditional ‘taxation’. There has also been extensive and ongoing tax legislative change, with a succession of lengthy Finance Acts – requiring consultation, implementation and development of guidance.
To provide a good standard of service to all taxpayers HMRC requires adequate resources and an approach which prioritises customer service. In practice HMRC staffing levels have been significantly reduced since 2010. All the evidence suggests that this has had an adverse impact on the service levels provided to individuals and smaller businesses. For the future Making Tax Digital will continue the trend of shifting the administrative burden of taxation to taxpayers.
The recent restructuring of HMRC into three new groups is intended to address customer service issues but it is too soon to say how effective this will be, particularly as further reductions in HMRC resources are planned.
A Public Accounts Committee report noted that whilst HMRC reduced its own costs of providing services for personal taxpayers between 2010–11 and 2014–15, costs to its ‘customers’ increased due to increased waiting times and call charges for HMRC’s helpline. According to the report every £1 saved by HMRC on its telephone services over the period resulted in an estimated £4 in additional costs to customers.
HMRC’s ‘Charter’ used to include a commitment to keep the cost of dealing with it as low as possible. In annual surveys from 2011 to 2015 no more than 41% of tax agents felt that HMRC had achieved the required standard in any year. It appears that this is no longer even one of HMRC’s aims as the commitment was dropped in the new version of the Charter published at the start of 2016.
The main focus of HMRC’s efforts over the next few years is Making Tax Digital which will have major consequences for customer experience and customer service. ICAS supports the overall objectives of MTD, as set out by HMRC in December 2015. The four ‘foundations’ are laudable goals, but we have significant reservations about the timescale and the mandatory approach particularly for small and medium enterprises.
In the context of HMRC resourcing and customer service we believe it is essential that MTD is not used as an excuse to reduce HMRC staff numbers further in the short to medium term. It should instead be used to free up staff for interaction with larger numbers of taxpayers, not least to provide vital assistance to those struggling with the transition to digital. ICAS has responded to the MTD consultations.
Read the full ICAS response to the APPG inquiry.