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Tax, not cuts to plug public deficit

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5th Jan 2010
Deputy Editor Sift Media
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HMRC should focus less on spending cuts and more on chasing the £130bn in uncollected, evaded and avoided taxes, says the Public and Commercial Services Union. 

The union warned that the main political parties were engaged in a bidding war over who could cut the most, whilst the government was losing billions to tax cheats.

The PCS estimates that £70bn is lost through tax evasion, while £25bn is lost through avoidance. It blamed some 25,000 job cuts at HMRC and plans to close 200 offices by 2011 for the £2.7bn rise in uncollected taxes last year.

 “Job cuts in HMRC illustrate the short sightedness of crude cuts where staff chasing tax have been axed, even though they recoup £600,000 each after staff costs. It is no coincidence that as HMRC staff have been cut, the amount of uncollected tax written off as doubtful has nearly doubled,” said Mark Serwotka, general secretary of the PCS.

The percentage of uncollected tax written off as doubtful to be collected is estimated to have risen from 23% in 2006 to 40% in 2009.

While the PCS was keen to link this with staff cuts, many in the profession feel it’s a symptom of the recession.

“The amount of uncollected tax is something which is highlighted every year in HMRC’s report. Inevitably one of the key reasons it has gone up this year is that the economy has been struggling - but it does need to be pursued, just as any business needs to pursue its debtors,” commented John Whiting, tax policy director at the Chartered Institute of Taxation (CIOT).

A spokesperson for HMRC told AccountingWEB.co.uk: “HMRC does not recognise these figures and we are continuing our work which has cut revenue losses by over £8bn per year between 2003 and 2008.”

He added that ‘significant progress’ had been made in key areas such as offshore evasion and the use of tax havens to evade and avoid UK taxes, which has protected the UK from losses of around £12bn since 2004.

Cut backs
On the subject of planned cutbacks, HMRC’s spokesperson said: “HMRC is subject to reductions in its overall running costs. However, our strategy is to focus resources on the risks and this means that we do not expect there to be any reduction in the effectiveness of our anti avoidance work.”

“We’ve regularly highlighted concerns about cutbacks both in the numbers of revenue staff and also the numbers of offices they have, as well as the over-rapid push towards automation and e-filing,” said Whiting.

“I don’t think we would make the connection quite as overtly as the PCS has, but we have a consistent record of flagging up concerns about cutbacks. We’re not standing in the way of progress, but the concern is that staff savings have been pushed along a little too quickly at times before systems were entirely ready,” he added.

Commenting on the findings, AccountingWEB.co.uk tax editor Rebecca Benneyworth noted that the situation is not quite as clear cut as the PCS suggested: “Times have moved on and HMRC is trying to modernise itself and operate on less staff. It used to have thousands of staff and operate from local offices. Nowadays automation has allowed staff to be redeployed from low level processing work into genuine revenue generation. Ultimately the revenue should be more efficient.”

One thing that's clear so far is that regardless of the outcome of this year's general election, tax is going to be a big issue in the coming years.

“We've got a huge deficit to close, so how are we going to do it? The political parties should bear in mind that we still need the system to run and be relatively simple, and to do that we need people - both agents and HMRC to make the system work,” concluded Whiting.
 

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By Anonymous
06th Jan 2010 11:50

Awkward squad

HMRC always know best, they will always deliberately do the opposite to what common sense would dictate.

Honest accountants and honest taxpayers are not supported, and one often forgets we are also competing against Tax cheats. Forget avoidance, Evasion is a much bigger problem that is endemic in our society and whilst the honest are bombarded by yet more unworkable rules the dishonest take full commercial advantage.

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By aburt01
06th Jan 2010 12:45

Taxing...
Collecting tax is taxing.
I don't think PCS know the half of it.

1. it is so costly to comply; e.g. be self-employed and you need expensive tax specialists to help you make your returns accurately, and HMRC need experts to check it. (Just ask any MP with expenses)
If the tax system or tax "code" as you call were simple, it would be easy to identify where revenue is due.
Instead of refining the rules over the years we have made the situation worse with the most complex rules of any country. Of course online returns should help the flow of information, but how do you check the info. is accurate?

2. It is so easy to run into the cracks and never be found.
It always seems to me the job of identifying revenue defaulters is too hard and costs too much to pursue.
Our 'working' population is very fluid, it must be a real headache keeping tabs on everyone who has the right to work here or trade here from Europe and beyond.
I would be interested to read some real figures on this.

Lastly the revenues have collapsed in general because big banks are no longer generating big taxable profits. All the public service unions are looking for anyone but their membership to suffer, that is their job after all, but they need to get into the real word, where small business is.

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By rockallj
06th Jan 2010 20:31

HMRC getting their sums right?

As long as HMRC getting their sums right, fair enough!

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By nogammonsinanundoubledgame
07th Jan 2010 07:37

"£25bn is lost through avoidance"???

What on earth is that supposed to mean?  If it is avoidance it is legal.  If it is legal, what is the definition of "lost"?

"Lost" through the failure of government to draft the legislation as it intended?

I consider the figures quoted to be highly suspect in any case.

With kind regards

Clint Westwood

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By mikewhit
08th Jan 2010 13:54

Avoidable

Clint,

It's probably 20% of the interest from tax-free ISAs plus 20% of the Personal Allowance per taxpayer ...

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By mikewhit
17th Jan 2010 12:29

Like TV licences ...

They could just take the approach that appears to be taken by the TV Licensing authority:

- identify all addresses with occupants

- identify all above occupants

- for each occupant, determine where on their system the person is represented in the HMRC, either as a taxpayer or unemployed/at school etc.

- each adult person should have a UTR and be represented somewhere under PAYE, self-employed, etc.

That should at least sweep up some of the 'grey' economy ... or is that not the kind of country you would like to live in ?

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