The Public Accounts Committee’s report on the failings of HMRC begs the question whether, as currently constituted, it is actually fit for purpose. The payment of tax in Britain by the super-rich and transnational corporations is now largely voluntary, and TNCs like Google and Starbucks comply with our tax rules only when it suits them. The revolving door between HMRC and the ‘big four’ accountancy firms, who recruit former tax inspectors to secure their expertise and regularly advise HMRC on the formulation of tax policy, leaches privileged knowledge and undermines effective tax collection. As soon as one abusive tax avoidance scheme is closed by HMRC, then another emerges. Up to 40% of the annual UK finance bill deals with such schemes, a huge waste of public resources.
The tax avoidance problem has been compounded in recent years by a significant re-structuring programme at HMRC. This switched its focus from tax collection to ‘customer relationship management’, particularly for the bigger corporations. This fundamental operational change lies behind the recent ‘sweetheart deals’ with major transnational corporations which have saved them billions in unpaid taxes and short-changed the Exchequer. To do its job effectively, HMRC needs to be effectively tasked and properly resourced. It makes no sense to cut the part of government that brings money in. Increasing resources would clearly deliver significant results: HMRC professionals bring-in as much as twenty times their employment cost.
Allied with the introduction of a robust General Anti-Avoidance Rule, as proposed recently by Michael Meacher, and radical steps to close tax havens, this would give HMRC a fighting chance. Tax evasion and avoidance in the UK is a serious problem, which requires a serious solution. As the late Ken Gill said, “You pay tax and you buy civilisation.”