HMRC has not agreed contingency measures with the Treasury should it run into difficulties with plans to digitise the tax system, and must take action to ensure it has a credible plan to make savings without damaging customer service, according to a report by the public accounts committee (PAC) which says its performance remains below par in several key areas
The report warns that ‘HMRC is staking a great deal on the success of its plans to digitise the tax system, but once again it lacks an adequate plan if demand for its call centres does not reduce as quickly as it hopes.’
Meg Hillier, PAC chair, said: ‘The lack of a convincing fall-back plan to safeguard service as HMRC undergoes significant change remains a looming threat to its ability to collect tax from individuals simply trying to pay their fair share.
‘HMRC's senior management cannot afford to be complacent about the catastrophic collapse in customer service in 2014–15 and the first half of 2015–16, nor about what is at stake should their projections about demand for call centres prove wrong.
‘Contingency planning should not be an optional extra. By the spring we will expect to see evidence that HMRC has agreed measures with the Treasury to ensure it is not left playing “catch-up” at taxpayers’ expense.’
The report analyses HMRC’s performance over the year and states that HMRC faces ‘an enormous challenge’ to maintain services, while delivering spending cuts, restructuring its business, replacing the Aspire contract, at the same time as re-locating almost all its staff and dealing with the implications of Brexit.
It describes the contract with Concentrix to investigate cases of potential fraud and error as ‘a complete failure’ and says HMRC must learn the lessons from it in order to improve service levels.
MPs also raise concerns about the way HMRC measures the tax gap, saying the way the measures are presented mean the impact of its efforts to close it remain unclear. The report calls for HMRC to report each year on the effect its work to generate compliance yield is having on its efforts to reduce the tax gap. As part of this, HMRC should assess how accurate its compliance estimates turn out to be in practice.
The committee remains unhappy about HMRC’s failure to make tax reliefs sufficiently visible to support parliamentary scrutiny and public debate, saying it does not provide sufficient information to explain the impact that tax reliefs are having on behaviour.
There is a call for greater transparency in the tax affairs of large multinationals ‘to increase the pressure on them to pay their fair share of tax’.
The committee is urging HMRC and the Treasury to take the lead in pushing for public country-by-country reporting, by arguing for international agreement on its introduction. The report says that while information is being provided about multinationals’ tax arrangements, it is supplied to HMRC in confidence which limits its usefulness.
The PAC is hosting a global summit on tax transparency on December 9, bringing together Parliamentarians from nearly 30 tax jurisdictions around the world. The committee said key aim of the event will be to work towards an agreement on a concordat outlining how Parliamentarians will hold governments to account on tax transparency.
PAC’s report, HM Revenue & Customs performance in 2015–16, is here.
