HM Revenue & Customs: Managing civil tax investigations - Public Accounts Committee Contents

3  Planning to meet future commitments

16. The Department's aims for 2011-15 are to be more efficient, more flexible in dealing with customers and more effective in collecting revenue. Under the Government's spending plans, the Department will do more to tackle tax evasion, avoidance, organised criminal attacks and debt. It is expected to bring in an additional £7 billion a year by 2014-15, compared to a total tax gap of £42 billion. At the same time it is to reduce its costs by 25%, although it can spend £917 million of the resulting savings on more enforcement and compliance work. [26]

17. The Department is currently developing its plans. It aims to increase steadily the additional revenue raised each year beyond the £13 billion additional yield it expects to achieve from all of its activities in 2010-11. As a result, over the next four years, it plans to bring in an extra £18 billion in total, giving a return of around 20:1 on the £917 million spending. Meanwhile, the savings will be made across the whole Department, allowing for the prospect that staff and resources may be redeployed to increase the scale of enforcement and compliance work.[27] The Department is due to publish its Business Implementation Plans by April 2011.[28]

18. The Department wants to develop its ability to take different approaches to different types of non-compliance in future, recognising that non compliance occurs for a range of reasons from innocent errors through to deliberate, concealed fraud. It aims to concentrate further its more experienced staff and specialist skills on the larger, more serious cases, and to deal with errors in a less resource-intensive way, and to spend the £917 million on the areas of greatest risk. It plans to spend around 65% of the funding on tackling non-compliance among small and medium-sized businesses, individuals and the hidden economy which accounts for around 60% of the tax gap. Its aim is to increase its coverage of the 4.8 million customers in these sectors. It plans to spend the remaining funding on work covering large businesses and wealthy individuals, collecting more debt and tackling organised crime.[29]

19. The Department recognises that it needs to improve its management information so it can determine the most cost-effective use of its resources. While it has monitored spending and progress towards targets in the past, it has not had sufficiently detailed information about the specific costs and returns of different enforcement and compliance activities.[30] It is seeking to address these gaps through the new case management system and economic model (paragraph 5), but will need to do so quickly if the extra spending on enforcement and compliance is to achieve maximum effect.[31]

20. The Department's performance framework does not capture the full effects of civil investigations and other enforcement work. Yield is the element of performance that is most readily measured, but the effect of the Department's work on taxpayers' future behaviour and its work to prevent error and fraud are also very important. The Department has worked with others internationally to estimate the deterrent effects of its activities which will inform the decisions it takes about where to put its resources. In 2011, it plans a broader set of measures to assess its performance on enforcement activities, including a measure of the actual cash collected as a result of its work.[32] It also told us that it will periodically reassess the tax gap, which it regards as a longer term indicator of its performance.[33]

21. The Department recognises that its staff have considerable commitment to its work but that there is a lot of dissatisfaction, as demonstrated in successive annual staff surveys. The next survey is due to be completed in December 2011.[34] The organisation has been through major change in the last five years, and career prospects have been restricted by office closures and reducing staff numbers. The Department has also made changes to strengthen management systems that do impose constraints on the way work is carried out, leading to concerns among staff about whether processes have become too bureaucratic. The senior management recognise they need to understand and address staff worries, and communicate better the reasons for change. Future plans will undoubtedly bring further changes that will be uncomfortable for some, but the planned expansion of enforcement and compliance work presents a clear opportunity to motivate staff.[35]

26   Q13; Business Plan 2011-2015, HM Revenue & Customs November 2010; Ev 13 Back

27   Qq 11-16, 34-35; Ev 13 Back

28   Business Plan 2011-2015, HM Revenue & Customs November 2010 Back

29   Qq 9-10, 13, 74-78; Ev 13 Back

30   C&AG's Report paras 7 and 16 Back

31   Qq 37-40, 69 Back

32   Qq 36,69; C&AG's Report paras 6, 4.14  Back

33   Q 46 Back

34   Qq 55-56, 62 Back

35   Qq 55-56, 61-67 Back

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