Public Accounts Committee says HMRC is ‘failing’ taxpayers

New report says the public purse is suffering from failure to tackle non-compliance


The Committee of Public Accounts (PAC) has today highlighted serious and ongoing concerns about evasion, avoidance and collection in the tax system.

In its report on the performance of HMRC for the year 2014-15, the PAC describes the number of prosecutions for offshore tax evasion as ‘woefully inadequate’, and warns that HMRC’s failure to gather intelligence on losses through aggressive tax avoidance is an obstacle to improving UK tax laws.

HMRC does not report on the scale of aggressive tax avoidance, which means parliament cannot assess whether tax law is working, and the PAC says it remains concerned that HMRC has ‘failed to act on the previous Committee’s recommendation from December 2013 that it should gather intelligence about the value of tax lost through aggressive tax avoidance schemes’.

HMRC’s failure in this area is illustrated by the description of their handling of the leaks by Hervé Falciani which claimed to give details of HSBC account holders engaged in immoral tax practices.

In November 2014, the previous Committee raised concerns about HMRC’s slow progress in acting on information from the Falciani list, which identified some 3,600 UK individuals potentially evading tax whose Swiss bank account details were leaked by a former employee of HSBC. HMRC had recouped £136 million from these investigations by November 2014.

However, 10 months later HMRC told the PAC that despite initiating 950 enquiries it had still only prosecuted one individual from the list and recovered £142 million in total.

Meg Hillier MP, chair of the PAC, said:

 “HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better.

“Tax avoidance also remains a serious concern. Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by parliament.

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public.”

The Committee has also raised fresh concerns about the quality of HMRC’s customer service, which it now considers to be so bad it could be having ‘an adverse impact on the collection of tax revenues’.

Figures show that in 2014-15, HMRC responded to just 72.5 per cent of calls and over the first half of 2015 this had fallen to 50 per cent. It’s worth bearing in mind that the previous Committee considered that HMRC’s target of answering 80 per cent of telephone calls within five minutes was ‘woefully inadequate and unambitious’ and recommended that HMRC should set more challenging targets for call waiting times.

According to the PAC, HMRC has consistently refused to set more demanding targets and has not provided any indication of when or by how much its customer service would improve, beyond a vague aim to improve year on year. This is described as being particularly concerning because tax collecting is known to be more effective when customers report satisfactory service.

Ruby Stockham is a staff writer at Left Foot Forward

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