PAC slates HMRC’s “woeful” performance

4 Nov 15

The Public Accounts Committee has slammed HM Revenue & Customs for significant ongoing failures and even deteriorations in its performance over the past year, which it said was putting a dent in the taxpayer’s purse.

In a report examining HMRC’s performance in 2014/15, the PAC described the department’s prosecutions for offshore tax evasion as “woefully inadequate”, its customer service as “abysmal” and its reporting as opaque, convoluted and misleading.

PAC chair Meg Hillier said: “HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better. It is important that the majority who play by the rules, paying their tax on time and in full, see that those who don’t will face the consequences.”

Hillier said the PAC were “deeply disappointed” by the low number of prosecutions brought by HMRC for tax evasion  ‒ an issue it also raised with the agency in December 2013. Since 2010 there have been just 11 prosecutions for offshore tax evasion.

The committee also criticised the department’s failure to gather intelligence on losses relating to tax avoidance. Again, it said related recommendations it had made in 2013 appeared to have carried no weight and accused HMRC of trying to avoid accountability by shirking recommendations that would improve transparency.

Hillier said “too many avoidance schemes run rings around the taxman” and comprehensive details of these must be provided in order to improve the UK’s tax laws.

HMRC’s annual reporting was also criticised as potentially misleading readers into believing the department has recovered more tax from compliance work than it actually has, the MPs said. For example, headings such as “cash collected” include cash not yet received, some of which never will be.

However, the report did commend HMRC for reducing tax losses and the balance of tax debt while paying out more in benefits and credits and reducing its running costs. However the Public and Commercial Services union, which represents many HMRC employees, cited this streamlining as the reason for the poor services highlighted by the PAC.

General secretary Mark Serwokta said it had long been “abundantly clear” that the axing of 11,000 full-time equivalent staff posts since 2010 had left the department unable to cope. He called for a more wide-ranging review of resources.

“HMRC needs major investment backed by a real political commitment to tackle tax evasion and avoidance as an alternative to more damaging spending cuts,” he said.

The PCS noted the criticism the department has been receiving from MPs for years in relation to its poor telephone service and chief executive Lin Homer’s admission in the foreword to the 2014/15 annual report that the department’s postal services were suffering as it tried to plug the holes in its phone lines.

Hillier and the PAC urged HMRC to rapidly improve its customer service, which is so bad “it could be considered a genuine threat to tax revenues”.

In the first half of 2015, the department’s telephone answer rate fell to 50%, with only 39% of calls being answered within five minutes. The committee says this could deter even those who want to pay their fair share.

A HMRC spokesperson said that while the department acknowledged its inconsisent levels of customer service in the first half of 2015 this had never affected its ability to collect tax, and around 3,000 new members of staff have since been hired to improve service levels.

The spokesperson said that HMRC are “disappointed” that the PAC seems to have overlooked the department's “record results”, which include collecting a high of £517bn in tax and reducing the difference between what is due and what is collected to levels that are amongst the “lowest in the world”.

They added that tackling tax evasion is a top priority for HMRC, which successfully prosecuted 1,200 cases and secured £26bn of additional yield across all of its compliance work last year alone.

The spokesperson said HMRC regularly publish the number of tax avoidance schemes, which show a steady decline as the result of tough government action. The department has also brought in more than £1bn from the first year of applying accelerated payments to avoidance cases, closed many loopholes and secured tough new enforcement powers, they said.

The PAC also recently criticised HMRC for a “paucity of ambition” in tackling fraud and error, as well as for employing a contractor with an “excessively threatening” approach to check tax credit claims.

Did you enjoy this article?