There is considerable dissatisfaction among the public
and tax professionals with the service that Her Majesty's Revenue
and Customs (HMRC) provides to taxpayers and benefit claimants.
Three areas in particular stood out in the evidence we received:
access to advice over the telephone; responses to post; and offline
alternatives to internet-based filing and guidance. This dissatisfaction
has been building for some years now, and was reported on by our
predecessors in the last Parliament. As such, we do not accept
the Department's explanation that these problems are primarily
the result of reconciling of multiple PAYE tax years at once.
There is a serious risk that if communicating with HMRC becomes
too time-consuming, difficult and expensive, respect for the tax
system, and with it voluntary compliance, may be undermined.
The PAYE system itself has been the subject of negative
publicity throughout the last year. The National Insurance and
PAYE Service should ultimately make PAYE work more effectively
and ensure efficiencies across the Department. However, the problems
resulting from its flawed implementation have done significant
damage to the public perception of HMRC and the tax system more
generally. It is crucially important that the 2012 target for
clearing open cases is met and that improvements in overall performance
follow soon afterwards.
Looking further ahead, HMRC has committed to an ambitious
timescale to deliver Real-time Information (RTI), driven in part
by the importance of the project in delivering the Universal Credit.
Implementing RTI before the system and its interface into HMRC
have been properly tested could led to greater delays later on
and further damage public confidence in the Department and the
tax system. We recommend that the Government only go ahead with
full implementation once the system has been fully tested, and
that its preparations should be subject to a real-time external
HMRC operates under significant pressures. It has
to implement increasingly complex tax legislation, sometimes developed
without full account of the practical consequences, whilst undergoing
restructuring, delivering substantial resource reductions and
job cuts. The Government has agreed a Spending Review settlement
with HMRC that involves further reductions, offset by "reinvestment"
in compliance and PAYE. Whilst genuine efficiencies have and will
continue to be made, we are concerned that performance may deteriorate
further if resource reductions are badly managed: we received
disturbing evidence of job cuts being made before the efficiencies
that were intended to enable them had been delivered, and of a
culture of command and control that disengages staff and prevents
potential problems from being dealt with effectively.
HMRC continues to face major difficulties with staff
engagement. Whilst staff remain dedicated to their work despite
the pressures HMRC is under, they have little confidence in the
leadership of the Department or that change will be for the better.
This has been a long-running problem for the Department. Whilst
senior management are very aware of the problem and have made
efforts to improve engagement, there has been little evidence
of any positive impact to date.
This report does not examine HMRC's performance in
ensuring it raises the correct amount of revenue in detail. We
intend to report on this later in the year. However, we do agree
with the Committee of Public Accounts that HMRC should examine
how it can improve accountability regarding the settlement of
large tax cases.