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Hartnett accused of arrogance after declining to say sorry

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The Chairman of the All-Party Parliamentary Taxation Group accused the UK’s senior tax official, Dave Hartnett, of arrogance after Hartnett claimed in a radio interview broadcast on 11 September that there was no need to apologise over the scale of PAYE over and underpayments.

HMRC’s Permanent Secretary for Tax was giving his first interview since it emerged that 1.4 million taxpayers face demands for unpaid tax relating to the last two tax years. Delayed reconciliations of PAYE records for earlier years are expected to result in many more taxpayers being told that they have underpaid.

Money Box presenter Paul Lewis invited Hartnett to apologise to ‘the six million people whose tax you got wrong’. ‘I’m not sure I see a need to apologise,’ Hartnett said. The 20-minute interview is available via

Later on 11 September Channel 4 News reported that Hartnett had released a statement saying: ‘I apologise if my remarks came across as insensitive.’

He added: 'I am working flat out with my colleagues to ensure everyone's tax is correct and the new computer system will help us do this. It was this new system that revealed the extent and size of reconciliations required and will help us be more accurate in future but we do not underestimate the distress caused to taxpayers and once again I apologise.’

Hartnett had told Lewis that stories of an HMRC blunder and IT failure were not true. ‘Every country that has deduction of tax has to do a reconciliation each year, and we’re doing one,’ he said.

HMRC had an obligation to be as accurate as possible, but things might happen late in a tax year that cannot be dealt with in the PAYE system. Working patterns had changed significantly in recent years, he added. HMRC, employers and employees were ‘all in the process together’. 

The tax owed by more than 80% of the taxpayers now being contacted will be collected via the PAYE system over between one and three years, Hartnett said. Those owing more than £2,000 who are outside self assessment will be asked to pay within approximately three months.

Hartnett explained that HMRC had decided to run a ‘controlled pilot’ in relation to about 40,000 people before launching the ‘full exercise’ for 2008/09 and 2009/10. Lessons will be learned from the pilot and HMRC will be sympathetic to people who say it is trying to take ‘too much money too fast’.

He accepted that there were ‘a lot of unreconciled amounts’ which HMRC was tackling, but said the system was ‘running with a very high level of accuracy’.

There was ‘no certainty’, Hartnett said, that all of the outstanding reconciliations for 2007/08 and earlier years would produce over or underpayments.

‘The tip of the iceberg’
Ian Liddell-Grainger, the Conservative MP heading the All-Party Parliamentary Taxation Group, told the BBC’s Today programme that MPs warned many years ago that the PAYE system was not robust enough. ‘We said there was going to be a meltdown. What we got totally wrong was the scale of the meltdown,’ he said.

The new National Insurance and PAYE Service (NPS) is a 21st century system but ‘PAYE is a 1940s system,’ Liddell-Grainger added. Until HMRC begins ‘real time collection’ the problems will continue. ‘This is the tip of the iceberg,’ he claimed.

HMRC is consulting on the use of ‘real-time information’ and the possible transfer, from employers to HMRC, of responsibility for calculating deductions.

HMRC has grown too big, Liddell-Grainger argued, and needs to be split into two or three organisations, with some of the work being done by the private sector.

The merger of Inland Revenue with Customs & Excise in 2005 was a mistake, he said. ‘We’ve seen with so many government departments that the moment that happens, it becomes inefficient and top-heavy, and then you get this sort of built-in arrogance that we’re hearing. You know, “I don’t need to apologise because I haven’t done anything wrong”.’

HMRC could enforce government policy while a private company collected the tax, he suggested. ‘Because at the moment it’s failing, it’s quite obvious, and the arrogance of Dave Hartnett is just really very worrying,’ he added, speaking before Hartnett's statement of apology.

‘I have no plan to resign’
Hartnett told Paul Lewis: ‘The crucial thing about the NPS is that it is producing really high levels of accuracy in reconciliation and is replacing a function that in the past had to be done manually. That’s what our systems will be doing more and more going forward.’

Lewis asked whether HMRC should face sanctions over what was being seen from the outside as ‘a bit of a fiasco’. Should Hartnett resign?

‘I have no plan to resign over this. I am addressing the issue. I think the nation actually needs me to do just that,’ Hartnett replied.

‘The introduction of the NPS is a crucial step in providing our customers with greater accuracy and better service going forward.’