Last month the parliamentary Public Accounts Committee made an astonishing discovery. If you cut back on tax collectors, you collect less tax.
Well, well, who would have thought?
Publishing a report on HMRC’s effectiveness, the committee’s chair, MP Margaret Hodge, pointed out that although HMRC had raked in an extra £4.32bn in tax revenue over the past five years, it could have collected a further £1.1bn had it not cut staff numbers by more than 3,300 over the lifecycle of its five-year so-called “compliance and enforcement” programme.
“The department must consider whether further staff cuts will deliver value for money for the taxpayer,” she added.
I think we can all answer that one on the department’s behalf. No, they would not. While there is always room for more efficiency in any organisation, even (or perhaps, especially HMRC), the government’s willingness to swing the axe in its revenue-collecting department when it needs every penny is baffling. Logic would suggest that we want more tax collectors at a time like this, not fewer.
Unsurprisingly, this is a view shared by the Association of Revenue and Customs, the union that represents HMRC senior managers. ARC president Gareth Hills says (somewhat ambitiously) that investing in professional staff could generate many times the £1.1bn lost in uncollected taxes – “money desperately needed to ease the pain of deficit reduction and to encourage much needed growth”.
“Public spending” may be a dirty phrase in this climate, but it seems to me that a little investment in HMRC over the next couple of years might not go amiss. When it comes to dealings with the taxman, accountants are in the front line so they know better than most what a sorry state the department is in. HMRC itself admitted that just 48% of calls were answered in 2010/11, a five-year low. And last year a scathing report by the Treasury select committee slammed HMRC for “endemic delays in responding to post”.
Responding to the report, Derek Allen, taxation director at Scottish accountancy body ICAS, called on HMRC to be more accessible to taxpayers and their professional advisers so that compliant taxpayers can pay the “right tax at the right time”. Accessibility comes at a cost, of course, and that cost is investment in contact centres and face-to-face advice. It seems inevitable that the government will have to dig into its pocket over the next couple of years or at least scale back HMRC’s four-year, £1.6bn cost reduction programme.
Then, perhaps, we will start to collect more of the tax we should be collecting. And one day, someone at HMRC might even answer the phone.