The House of Commons' Public Accounts Committee (the PAC) has again been highly critical of HMRC's performance levels in delivering customer service, tackling avoidance and improving reporting.
In its report on HMRC performance in 2014-15 the PAC acknowledges that HMRC have increased tax take whilst reducing administrative costs, but this does not tell the whole story.
Possibly the most shocking statistic in the latest report is that despite setting itself a 'woefully inadequate and unambitious' target of answering 80% of telephone calls within 5 minutes, in the first half of 2015 HMRC only managed to answer 50% of calls, and only 39% within 5 minutes.
The report is particularly scathing about HMRCs failure to act upon previous recommendations made by the PAC, indicating that they can see no reason for this.
In summary, HMRC still:
- Deliver an unacceptable standard of customer service
- Do not report how much cash is actually received due to compliance work
- Do not report the scale of aggressive tax avoidance which exploits loopholes in the law
- Deliver too few prosecutions for tax evasion thus providing no credible punishment or deterrent
- Avoid publishing information on the scale and nature of tax reliefs
The report makes six recommendations, some not for the first time, as follows (in italics):
Customer service
HMRC should identify what impact their poor level of service is having on tax revenues and produce a detailed plan setting out how and when they will provide an acceptable standard of customer service. This should include a clear plan for the efficient management of their change programme and introduction of new IT systems.
In March 2013, the Committee concluded that HMRC had “an abysmal record on customer service” having only answered 74% of telephone calls received by their contact centres during 2011-12. In the first half of 2015 this had fallen to 50%. Despite acknowledging that people are more likely to pay the right tax when they find HMRC easy to deal with, HMRC could give no indication as to when or by how much their customer service would improve. The PAC are concerned that customer service levels are now so bad that they are having an adverse impact on the collection of tax revenues.
Performance measures
HMRC should report their performance against measures which reflect all their aims, including providing a consistent level of service and ensuring that accurate and complete advice is provided first-time.
HMRC claimed that their focus was on providing a consistent level of customer service rather than on meeting targets, however the consistency of service is not being measured.
Tax evasion
As previously recommended, HMRC should strengthen their capability to investigate offshore tax evasion and make tougher the criminal and civil sanctions they can apply. They should make clear that those who persist in their attempts to hide assets offshore will face the threat of prosecution, and should in future demonstrate the significance of this threat through their actions.
HMRC have either ignored the previous recommendation or made little progress. Only 11 prosecutions have been made since 2010.
Compliance
HMRC should report their compliance yield in much clearer and simpler terms. They should state how much cash its compliance activity has recovered each year, alongside their estimates of future revenue and losses prevented. They should also report the range of uncertainty around their estimates.
HMRC include amounts which they expect to receive in future years in their compliance figures for current years, which the PAC report describes as 'questionable and misleading'.
Tax avoidance schemes
HMRC should identify and report the value of all tax avoidance schemes. They should include an estimate of the value of those schemes they have challenged but which have been judged to be legal by the courts, both so that Parliament can see the scale of avoidance and ensure improvements are made to tax law.
PAC recommended that HMRC provide this information in December 2013, and the International Monetary Fund has also recommended that tax lost through avoidance activity should be recorded. Without this information, Parliament cannot judge the effectiveness of tax laws.
Tax reliefs
HMRC should define the different types of tax relief, including those they consider to be tax expenditures. They should identify which reliefs they consider require monitoring and evaluating and publish this information to enable Parliament to decide which reliefs may require further scrutiny or legislative change.
This recommendation has also been made in earlier reports.
