There’s a big hole in the heart of the seven consultation documents the government published on Monday about MTD, the plan to “make tax digital”, and it is this: why the hell are they doing it in the first place?
Seriously. The overview document begins
The way you interact with the tax system is changing. From 2018 it will become increasingly digital and most businesses, the self-employed and landlords will need to use software or apps to keep their business records, and to update HMRC quarterly. The underlying tax rules will be simplified to support these changes.
Note the passive “is changing”. Not the active “we are changing it…”
The main business document tells us baldly that it is consulting on how and not whether to MTD (make tax digital).
At Autumn Statement 2015, the government announced that, by 2020, it would require most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HM Revenue and Customs (HMRC) at least quarterly via their digital tax account. This consultation considers in more detail how these new processes should operate.
The Ministerial introduction tries to allay any fears we may have:
Freeing businesses from red tape and allowing them to flourish is a central part of our long-term economic plan for Britain. Businesses want a simpler tax system.
This is why at the 2015 Spending Review the government announced it would invest £1.3bn to transform HMRC into one of the most digitally advanced tax administrations in the world. We want to create something that is more effective, more efficient and easier for taxpayers.
OK then, but why (in the impact assessment chapter, on page 60) do we identify administrative burden savings for business of somewhere between £85m and £250m globally as against a saving to the exchequer (page 67) of £945 million – plus an uncosted benefit to HMRC from “significant operational changes”, including the orwellian “enhanced risk rules which will build in upstream compliance through nudges, prompts and personalised messaging for businesses” (page 71)
My problem is I think there’s probably a good idea in there somewhere, but HMRC have lost their mojo as far as communications are concerned. They can talk to “stakeholder groups” all they like but they aren’t reaching the rest of us – and it’s human nature that commentators *cough* who aren’t on the “stakeholder” lists are going to be a bit pissed off that they had to find out about the condocs from twitter or from the Daily Telegraph. My sole (thus far) academic paper is entitled “Tax Prats and Citizen Stakeholders” and “argues that othering non-professionals as ‘tax prats’ should cease in favour of inclusion of ‘citizen stakeholders’.” In other words, we are all stakeholders in our country’s tax system and the conversation about a change as sweeping as this one shouldn’t take place only between professionals, whether they be professional tax practitioners or professional commentators.
What would I have done differently?
Well look at online tax returns. In 2015 85% of us, over ten million people, filed tax returns online. In 2002 it was seventy five thousand. Why the change? Because it’s easier, there’s no compulsion, and because there are benefits for both sides (you can do it later, and it works out how much you need to pay).
I’d have built an app and put it out onto the app stores and let people see for themselves whether it was better. I’d have had a Hector the Inspector avatar walk you through what to click to get it to work and hired Ewan McGregor to do his Alec Guiness lite voice over.
I’d have made it simple as a game and made it work with all the most common accounting packages. I’d have made it like a fitness app or a calorie counting app, where you can get the data from elsewhere (a fitbit or a barcode on your shopping, or in this case a bookkeeping app) or you can enter the data yourself… and then press a button to close it off/agree it’s correct. I wouldn’t have linked it to the HMRC systems but I’d have had it tell users that “if your results for this quarter were repeated for the rest of the year you would need to pay [x amount] of tax and NIC”… and then I’d have worked out a way to make final result (“if you’re happy with the figures, click here…”) flow to the HMRC system, even if that bit had to wait a year or two. I’d have spent half a million developing a clever, cute little app that did at least some of what the MTD project is supposed to do and put it out there free of charge for people to try if they felt like it, use if they wanted to. And THEN we could have had a meaningful conversation about how to get people to use it, without arguing about whether we’re talking about four tax returns a year, compulsory photographing of receipts and using the system as a “cash cow”. If you build it, they will come.