HC 479 - HMRC's operation of the PAYE system

Written evidence submitted by the Public and Commercial Services Union

Job cuts in HMRC

At the time of the merger of the former Inland Revenue and Customs & Excise to form HMRC in April 2005, the new department employed just over 104,000 staff. Over the course of the last five years the department has reduced its staffing complement to just over 75,000. In addition, HMRC has closed more than 200 local tax offices in this same period, and is in the process of closing or radically reducing the opening hours of 200 walk-in tax enquiry centres.

Whilst PCS has always accepted that a degree of rationalisation was necessary to streamline the two departments and reduce costs generally, PCS expresses its concern about the clear correlation that we believe exists between the job cuts and office closure programme and the ability of HMRC to collect and administer tax effectively.

PCS has previously given evidence to the treasury committee, in both 2007 and 2009, expressing our concern about the volume of work that is being stored up by HMRC and which remains unactioned. This includes around one million pieces of post from tax payers which HMRC do not have the capacity to deal with, as well as the 18 million ‘open cases’ which the NAO cristicised the department for not dealing with adequately and which have led to the current crisis around PAYE under and over payments as exacerbated by the pressure to introduce inadequate computer systems.

PCS note that over 40 million calls to its call centre network went unanswered last year and we suggest that the current PAYE crisis, and the queries from tax payers this will inevitably generate, will render the service even more vulnerable.

PCS believe, nevertheless, that HMRC are right to collect the revenue owed to the Treasury and express disappointment that, as we understand it, the department are currently prepared to right off unpaid tax debts which fall below a £300 threshold. We believe this is a straightforward symptom of understaffing and suggest that the £2 billion that might be yielded from these tax debts is worth devoting resources to collecting.

We note also that the size of the ‘tax gap’, the difference between tax that could be collected and the tax that is collected, is at least £40 billion by HMRC’s own estimates. PCS believe that, on the basis of the estimates provided by tax experts this tax gap stands at a figure closer to £120 billion. Part of this gap is made up of known tax debt worth £28 billion, and which we believe as a minimum HMRC should be actively pursuing.

PCS are therefore extremely concerned about the impact that further cuts under the terms of the next spending review will have on the ability of HMRC to effectively collect tax, maintain the confidence of tax payers and be able to deliver a quality public service. To this end, we believe it makes no sense to reduce the numbers of the very staff who collect the taxes that build our schools and hospitals. If we are to avoid a further crisis of public confidence in HMRC PCS would urge that the department is properly resourced and staffed.