New tax reports: The Public Accounts Committee has published its 49th and 50th reports of this session, The effective management of tax reliefs and Improving tax collection, following evidence given to the PAC from Jim Harra (HMRC director general of business tax), Lin Homer (HMRC chief executive and permanent secretary), Indra Morris (HM Treasury director general of tax and welfare) and Jennie Granger (HMRC director general of enforcement and compliance).
In the 49th report, the PAC concluded that HMRC has not recognised fully its responsibilities for assessing the value for money of tax reliefs, that tax reliefs ‘add to the complexity of the system and may be exploited as a way of avoiding tax’ and that HMRC didn’t monitor or take into account the cost to the Exchequer of tax reliefs; and recommended that HMRC ‘should draw up a set of principles to guide its management and reporting of tax reliefs which make clear how it will discharge its responsibility to monitor, evaluate, and assess tax reliefs’ as well as improve transparency and regularly monitor its forecasts of the costs of tax reliefs and evaluate whether the reliefs ‘achieve the desired impact in a cost effective manner’.
In the 50th report, the PAC expressed concerns that ‘HMRC’s relationship with large accountancy firms is too cosy’, saying that the complexity of the UK’s tax code encouraged avoidance and that there were not enough tax evasion prosecutions to act as an effective deterrent; it also found that ‘some HMRC customers receive an unacceptable quality of service’ and that HMRC’s handling of whistleblowers was ‘disappointing’. The PAC recommended that HMRC ‘should set out how much additional tax it could collect if it was granted more funding to build its capability in the most critical areas’, that HMRC should work with the Crown Prosecution Service to increase the number of prosecutions, ‘radically reduce’ the number of tax reliefs and that the government should introduce ‘new offences to penalise those involved in advising or helping companies and individuals avoid or evade tax’.
Releasing the reports, PAC chair Margaret Hodge MP commented: ‘HMRC needs to show that it comes down hard on tax cheats and change the perception that it is far too tolerant of these companies and individuals – in contrast to its treatment of small businesses and the majority of the public who pay their taxes through PAYE. We are not persuaded that HMRC and the CPS are doing enough to prosecute serious tax evasion cases.’
HSBC and criminal prosecutions: Separately, the PAC has continued its inquiry on the recent allegations of tax avoidance and evasion at HSBC Suisse. On Monday, the PAC heard from Ed Troup, HMRC’s second permanent secretary and tax assurance commissioner, and Dave Hartnett, former HMRC permanent secretary for tax.
Commenting on the information on 3,600 individuals that was provided to HMRC when Hartnett was in charge, Hartnett, who now works for HSBC, expressed his ‘personal surprise’ that ‘only one, two, or three [individuals]’ from thousands had been prosecuted, saying: ‘I'd like to understand why there weren't more criminal prosecutions. I'd always expected there to be more. I'd have liked to understand what would have happened if more resources were diverted to [investigating the leaked details].’ Hartnett agreed with the PAC that it was a ‘miserable result’, adding: ‘Taxpayers tend not to plead guilty these days; things tend to get really dragged out. The world has changed.’
Ed Troup told the PAC that he ‘was quite surprised to hear [Hartnett’s] comments’ over the lack of prosecutions, and insisted that HMRC had been ‘diligent’ in following up the information it had received from the French authorities. ‘We have collected £135m,’ he told the PAC. ‘We believe we have collected all the tax, all the interest, and a significant amount of penalties.’
New tax reports: The Public Accounts Committee has published its 49th and 50th reports of this session, The effective management of tax reliefs and Improving tax collection, following evidence given to the PAC from Jim Harra (HMRC director general of business tax), Lin Homer (HMRC chief executive and permanent secretary), Indra Morris (HM Treasury director general of tax and welfare) and Jennie Granger (HMRC director general of enforcement and compliance).
In the 49th report, the PAC concluded that HMRC has not recognised fully its responsibilities for assessing the value for money of tax reliefs, that tax reliefs ‘add to the complexity of the system and may be exploited as a way of avoiding tax’ and that HMRC didn’t monitor or take into account the cost to the Exchequer of tax reliefs; and recommended that HMRC ‘should draw up a set of principles to guide its management and reporting of tax reliefs which make clear how it will discharge its responsibility to monitor, evaluate, and assess tax reliefs’ as well as improve transparency and regularly monitor its forecasts of the costs of tax reliefs and evaluate whether the reliefs ‘achieve the desired impact in a cost effective manner’.
In the 50th report, the PAC expressed concerns that ‘HMRC’s relationship with large accountancy firms is too cosy’, saying that the complexity of the UK’s tax code encouraged avoidance and that there were not enough tax evasion prosecutions to act as an effective deterrent; it also found that ‘some HMRC customers receive an unacceptable quality of service’ and that HMRC’s handling of whistleblowers was ‘disappointing’. The PAC recommended that HMRC ‘should set out how much additional tax it could collect if it was granted more funding to build its capability in the most critical areas’, that HMRC should work with the Crown Prosecution Service to increase the number of prosecutions, ‘radically reduce’ the number of tax reliefs and that the government should introduce ‘new offences to penalise those involved in advising or helping companies and individuals avoid or evade tax’.
Releasing the reports, PAC chair Margaret Hodge MP commented: ‘HMRC needs to show that it comes down hard on tax cheats and change the perception that it is far too tolerant of these companies and individuals – in contrast to its treatment of small businesses and the majority of the public who pay their taxes through PAYE. We are not persuaded that HMRC and the CPS are doing enough to prosecute serious tax evasion cases.’
HSBC and criminal prosecutions: Separately, the PAC has continued its inquiry on the recent allegations of tax avoidance and evasion at HSBC Suisse. On Monday, the PAC heard from Ed Troup, HMRC’s second permanent secretary and tax assurance commissioner, and Dave Hartnett, former HMRC permanent secretary for tax.
Commenting on the information on 3,600 individuals that was provided to HMRC when Hartnett was in charge, Hartnett, who now works for HSBC, expressed his ‘personal surprise’ that ‘only one, two, or three [individuals]’ from thousands had been prosecuted, saying: ‘I'd like to understand why there weren't more criminal prosecutions. I'd always expected there to be more. I'd have liked to understand what would have happened if more resources were diverted to [investigating the leaked details].’ Hartnett agreed with the PAC that it was a ‘miserable result’, adding: ‘Taxpayers tend not to plead guilty these days; things tend to get really dragged out. The world has changed.’
Ed Troup told the PAC that he ‘was quite surprised to hear [Hartnett’s] comments’ over the lack of prosecutions, and insisted that HMRC had been ‘diligent’ in following up the information it had received from the French authorities. ‘We have collected £135m,’ he told the PAC. ‘We believe we have collected all the tax, all the interest, and a significant amount of penalties.’
