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In 2013-14, HM Revenue & Customs (HMRC) reported exceeding its target for 'compliance yield' —the additional tax revenue it generates from its work to tackle those who do not comply with their tax liabilities. However, over the 2010 spending review period it has been overstating the extent to which its performance has improved. When HMRC agreed with HM Treasury (the Treasury) how it would measure performance over the period, it made errors which led it to set its baseline £1.9 billion too low. So the Department has been measuring its performance against a false baseline. As a result, its targets were easier to achieve, and it misreported its achievements. HMRC has also made significant changes to how it measures its compliance performance. When reporting performance in its Fast Facts publication it failed to acknowledge these changes and again overstated its performance. The changes mean that the measure currently lacks the certainty and clarity for Parliament and taxpayers to fully understand it or use it to hold HMRC to account over the longer term.
We welcome the action HMRC has taken to address some of our concerns around tax avoidance, for example by proposing the accelerated payments scheme. But slow progress in other areas has put tax revenues at risk at a time when pressures on the public finances are acute. HMRC assures us that it now has the right number and quality of staff to tackle tax avoidance, having invested in recruitment and training and brought its counter avoidance experts together in a new directorate
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