New Chartered Institute of Taxation (CIOT) president Anthony Thomas started his term of office last week with a hard-hitting speech that took HMRC to task for failing to maintain standards - and trust - in its dealings with tax professionals.
“A fair tax system requires respect on both sides. HMRC are at risk of damaging the trust that has been built up over centuries between tax payers and tax collectors,” he said.
HMRC has undermined respect and trust among taxpayers and advisers in recent years with an array of unsatisfactory behaviours:
- Issuing press releases, technical briefs and toolkits that often add to the complexity of tax practice rather than clarifying it. “It is extremely difficult to have trust in the tax authorities when they feel they have the power to introduce de facto secondary legislation with no Parliamentary scrutiny,” Thomas said. “We need to get back to taxing in accordance with the rule of law.”
- As part of its modernisation programme the department has been seeking new powers without demonstrating why existing powers are inadequate - an argument characterised last year by Lord Chief Justice Judge as “the argument of tyrants”. Powers to levy penalties and gain access to taxpayers’ data have been extended, sometimes without proper safeguards, Thomas warned.
- Constant modernising since the Inland Revenue-Customs merger resulting in “disastrous” upheaval and a sequence of operational failures such as last year’s PAYE coding fiasco. “Top management at HMRC now appear to be concerned almost exclusively with processes coupled with an obsession with tax avoidance and tax evasion,” he added.
- Taxpayers increasingly receive computer generated documents sent under new initiatives where no attempt appears to be made to verify their validity. Many are issued incorrectly, but the onus is on the taxpayer to appeal against them. “The overall impression is that HMRC is attempting to have automated processes make up for its declining numbers of staff, who in any case often lack proper training and the skill to make appropriate judgements.” Thomas said. “There is a complete failure to recognise that tax is complex and, until simplified, cannot easily be converted into automated processes.”
- Privatisation of debt collection, where poor communication and lack of attention to safeguards can have serious implications for those on the receiving end.
- Unrealistic consultations that leave no time for responses to be considered, and too much reliance on “soft landings” and “light touches” when new legislation is introduced without due consideration.
- Referring to taxpayers as customers when it does not treat them as such. No customer would continue to put up with unanswered telephone calls and letters, loss of confidential data, and technical errors by inadequately trained staff, he said.
It’s a damning charge sheet that reflects the reputational damage HMRC has suffered in recent years. “A department once regarded with circumspection but trusted and respected is becoming disliked, mistrusted and feared,” Thomas said. “It will take years to rebuild that trust between taxpayers and HMRC.”
Relations with tax advisers have suffered similar damage. The CIOT president added that HMRC managers are happy to work closely with the profession and rely on their expert advice when it suits them, yet ignore sensible suggestions.
The supposed “special relationship” that exists between HMRC and tax advisers is like the one between the US and UK governments, he added: “It always favours one side, and that side is not ours.”
Instead, Thomas called for a return to the “healthy tension” that used to exist 10-20 years ago, when tax officials applied the law in an even-handed manner and did not subject business and professions to policiticised lectures. “No special relationships; no cosy conferences; no favours, deals and understandings; no inside tracks and private access. Instead there was straightforward dealing; openness and frankness with honest broking and above all a genuine willingness to work together with total transparency and integrity,” he said.
For his year in office, Thomas said his mission would be to try to turn the tide and get relations back on an even keel. He would fight any attempt by HMRC to impinge on the relationship between client and tax agent and urged the department to get its own house in order before attempting to roll out a registration and disciplinary mechanism for tax advisers.
Striking a constructive note, Thomas said the CIOT would take the opportunity to try and re-establish trust around the agent relationship consultation process that is due to start up again shortly.
“My hope is that by this time next year we will have been successful in starting to remove some of the danger… inherent in an aggressive tax authority with overbearing powers,” he said.
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