Reforming HMRC ‚ Labour‚ s review reports

24 Jul 2017

A year ago, in his speech to Labour Conference, Shadow Chancellor John McDonnell announced he had commissioned a review of HMRC. That review, chaired by Professor Prem Sikka, reported today.

The paper doesn‚ t seem to be anywhere online, so we‚ ve reproduced the text of the executive summary below, for information of course (no endorsement implied). Below that are some initial comments made by the CIOT‚ s Tax Policy Director, in response to an enquiry from the Financial Times.

It should be noted that the paper makes clear that it is the recommendations of an independent review and only constitutes a submission to Labour‚ s policy making process, rather than constituting Labour policy itself.

Reforming HMRC ‚ Executive Summary

Her Majesty‚ s Revenue & Customs (HMRC) performs a vital task in collecting taxes, enforcing lax laws and delivering services to taxpayers. Against a background of reductions in resources, it has experienced considerable difficulties in meeting the service expectation of taxpayers and challenging organised tax avoidance. This policy paper investigates the difficulties and makes recommendations to strengthen HMRC and its public accountability. The reforms include the following:

1. The formation of a Supervisory Board, consisting of stakeholders, to watch over HMRC Board to give it direction and enhance its public accountability. The Board shall act as a bulwark against corporate capture and inertia and be accountable to parliamentary committees. 2. The Supervisory Board should support and protect tax whistleblowers. 3. Additional investment in HMRC resources and staffing. 4. HMRC needs local knowledge and must respond to citizens‚ concerns. This is best achieved through a network of local offices and staff with local knowledge. 5. HMRC should have a well resourced internal investigation and prosecution unit. This would strengthen its in-house institutional knowledge base. 6. HMRC should offer competitive financial rewards to its staff. 7. Stronger parliamentary oversight. 8. The tax returns, related computations and documents of all large companies must be made publicly available. The public availability of corporate tax information will improve the quality of information available to parliamentary committees to scrutinise the effectiveness of HMRC in meeting its objectives. 9. Parliamentary committees should be empowered to examine any tax information, no matter how sensitive. It would be up to the relevant parliamentary committee to decide whether scrutiny of any documents and 10. The backlog of tax cases creates uncertainties and anxieties. This is also unfair to taxpayers. The judicial capacity to hear cases should be expanded. 11. Various reports published by HMRC should contain information that enhances transparency and accountability. 12. Public pressure is a vital ingredient in transforming HMRC. It should not be diluted by the introduction of fees to challenge tax assessments. 13. HMRC needs effective tools to combat sham. We recommend a rewrite of the General Anti Abuse Rule (GAAR). HMRC should be guided by the Department of Justice and/or a panel of retired judges, rather than by corporate elites.

CIOT response

In response to a request from two media outlets for comment, John Cullinane, CIOT Tax Policy Director, said:

‚ This report makes some important points about the need to ensure HMRC is adequately resourced to carry out its compliance work, and to provide a good level of service to ordinary taxpayers. It is also right to highlight the harm that rising tribunal fees could cause to access to justice.

‚ Some proposals, however, appear driven by a belief that HMRC has been ‚ captured‚ by big business, which I think is mistaken, and which I am sure will come as a shock to all those in business who deal with HMRC. Publication of large companies‚ tax returns and related documents would put a huge quantity of figures and technical data into the public domain but would probably not add a great deal to the sum of human understanding or reassure the public if they believe that some multinationals are not paying enough tax. In particular, no amount of ‚ transparency‚ in the UK will correct deficiencies in the US tax system.

‚ The idea of a Supervisory Board, to scrutinise HMRC and watch over the actual HMRC Board, is an interesting one. We already have parliamentary committees, who surely should regard scrutinising HMRC on behalf of taxpayers and the wider public as their job. But it is worth exploring this further.‚

George Crozier CIOT Head of External Relations Thursday 8 September 2016