The sheep thingNovember 27, 2015
Have a look in Hansard at the debate about the HMRC closures:
Many MPs and tax experts support the view that a visible and local HMRC presence is essential to maintaining confidence in the tax system. Does he not believe that the measures that have been announced by HMRC will open the way for more tax avoidance?
No, I do not. As I have made clear, the number of HMRC officers has been falling since its creation in 2005, including over the past five years, and we have seen the closure of inquiry centres, as has been touched on, but HMRC’s success in dealing with tax avoidance and evasion over that period has been marked and has improved. The truth is that HMRC deals with tax avoidance and evasion principally through sophisticated data analysis and by bringing together highly skilled people. The more that we can do of that, the bigger the difference we will make.
There are several issues raised by the prospective closure of HMRC’s network of offices, and it does no-one any favours if we braid them together and pretend they’re all one and the same.
First of all there’s the argument that “tax avoidance and evasion” are fought “principally through sophisticated data analysis”. I have no recent practical experience of whether or not that’s true – the last time I looked at a set of accounts in anger, the dispute was over whether an inspector’s judgement was more effective than a “package” of data sent from a remote analysis unit. At the time it wasn’t, but I strongly suspect the balance has swung the other way and this is the way most cases will be broken in the future, particularly the larger ones.
But that isn’t the same argument as this one: “Many MPs and tax experts support the view that a visible and local HMRC presence is essential to maintaining confidence in the tax system.” A remote analysis unit can’t do that job.
It’s an oversimplification, but think of it this way. HMRC exists to serve us, the taxpaying public, by bringing in the money which funds public services. They do that to a large extend by administering the tax system so that we, the taxpaying public, can pay our taxes. That sounds like tautology but in fact it’s a profound truth. I want to pay my taxes. I want to pay the right amount at the right time. I want to do it with the least amount of contact with HMRC possible, but if I *do* need to speak to them, I want them to be there, where I can get at them, to be contactable, and to be courteous, authoritative and knowledgeable when I speak to them. And – as a taxpayer – I want them to come down in righteous wrath on the people who don’t do that.
There are two constituencies to be served, in other words. The avoiders and evaders might well best be tackled by specialist accounts factories in remote locations: the first time an evader needs to contact HMRC is when they knock on their door with a warrant. The rest of us, however, need an entirely different kind of service: local, accessible, friendly, helpful. Treat avoiders and evaders like regular taxpayers and you may “nudge” some of them into normalising their relationship with taxes and behaving like the regular taxpayers they’re being taken for. Treat regular taxpayers like avoiders and evaders, however, and you risk them saying to themselves, well, may as well be hanged for a sheep as a lamb…