While grilling former permanent secretary of HMRC Dave Hartnett and current tax assurance commissioner Edward Troup, PAC chairperson Margaret Hodge accused HMRC of unfairly targeting small businesses.
Hartnett appeared first and in one of his testimony's more candid moments, he expressed regret toward "the process" by which HMRC reached settlements with big business and offshore tax evaders.
When pressed on why HMRC didn’t prosecute more people after receiving a list of 1,000 HSBC offshore account holders from former disgruntled HSBC employee Hervé Falciani, Hartnett admitted his surprise.
"I would like to understand why there weren’t more criminal prosecutions,” said Hartnett. “I'd always expected there to be more. I'd have liked to understand what would have happened if more resources were diverted to it.”
The Revenue did, however, manage to recoup £135m in repayments.
Hartnett maintained that he bore no responsibility for any potential prosecutorial leniency and never saw the Falciani leak despite his position as permanent secretary.
“I did not have accountability for enforcement,” he said. “I’m not here to get off the hook as I was never on the hook.”
Hartnett’s denials did not satisfy Hodge, who was relentless in her criticism, at one point stating “I’m aghast” and telling Hartnett that he will always be associated with the “old way” that “many people now find unacceptable”.
After Hartnett, Edward Troup appeared before the committee. In his opening statement, Troup heralded the HMRC’s success in lifting the veil on Swiss banking secrecy.
“In the early 2000’s banking secrecy seemed impregnable, the idea that this secrecy could be breached was unthinkable,” said Troup. “From 2018, we will get information from Swiss banks automatically, not just on command.”
“And what are you doing now?” asked Hodge, cutting Troup short. “It’s always the future; I’m interested in the now.”
“We have quintupled the number of prosecutions for tax evasion over the last five years,” said Troup.
“How many were small businesses?” asked Hodge. “What we’re interested in is equality of treatment, SMEs aren’t treated equally.”
In reply, Troup said that he wouldn’t go into operational detail and that it was “perception” that SMEs are treated differently from large enterprises.
This drew the ire of MP Richard Bacon. “It is not merely a perception – it’s a fact that the way small enterprises are treated is different,” he said. “For you to sit here and claim that it’s perception makes you look rather out of touch.”
Troup remained defiant, saying that HMRC has to "put some effort into enforcing compliance among SMEs, they represent £15.1 bn of our tax yield".