Improving tax collection - Public Accounts Contents

1  HMRC's overall response to our recommendations in this Parliament

1. Since 2010 we have published 20 reports on issues of taxation and taken evidence from a range of witnesses. On the basis of a report from the Comptroller and Auditor General we took evidence from HM Revenue & Customs (HMRC) on how it has responded to the recommendations we have made in this Parliament.[1]

2. We have made around 100 recommendations to HMRC since June 2010, recommending that HMRC make improvements in areas such as: addressing tax avoidance by multi-national companies; tackling the promoters and users of tax avoidance schemes; settling large tax disputes; the administration of personal tax; and customer service.[2] HMRC has responded positively to many of our concerns.[3] It has accepted over 80% of our recommendations and has completed the implementation of more than two thirds of those accepted.[4] There remains, however, much more for HMRC to do.

3. We have asked HMRC on a number of occasions whether it has the resources it requires to address fully our recommendations. Although HMRC has reduced its headcount from 86,000 in 2007-08[5] to 61,400 at 31 March 2014[6] it has maintained that it has the right number of staff to tackle tax avoidance.[7] In our report on the role of large accountancy firms in tax avoidance we concluded that HMRC was not able to defend the public interest effectively when its resources were more limited than those of the big four firms who employed almost 9,000 people as part of their UK tax practice. Providing tax services to companies and wealthy individuals was worth around £2 billion for the four large accountancy firms. We noted that HMRC had 65 transfer pricing specialists compared to some 250 in the four firms.[8] HMRC told us that the number of transfer pricing specialists it employs has now increased to almost 80.[9] HMRC's response to our concerns that the industry of accountants, lawyers and bankers who advise people on how to avoid tax is much better resourced than HMRC has been to note that it has extremely good tax experts.[10] In 2012 HMRC told us that it would expect a 1:10 ratio between spend on additional staff and the compliance yield they would return, and that in the first year of bringing in 1,000 new staff the ratio had been around 1:11.[11]

1   C&AG's Report, Increasing the effectiveness of tax collection: a stocktake of progress since 2010, Session 2014-15, HC 1029, 6 February 2015, hereafter referred to as 'Increasing the effectiveness of tax collection' Back

2   C&AG's Report, Increasing the effectiveness of tax collection, Figure 1 Back

3   C&AG's Report, Increasing the effectiveness of tax collection, paras 7-8 Back

4   C&AG's Report, Increasing the effectiveness of tax collection, Figure 1 Back

5   C&AG's Report, HM Revenue & Customs' transformation programme, Session 2007-08, HC 930, 18 July 2008,Para 1.5 Back

6   C&AG's Report, HM Revenue and Customs Accounts 2013-14, Session 2014-15, HC 19, 3 July 2014, para 1.8  Back

7   Committee of Public Accounts, HMRC's progress in improving tax compliance and preventing tax avoidance, Eighteenth Report of Session 2014-15, HC 458, 18 November 2014, para 16  Back

8   Committee of Public Accounts, Tax avoidance: the role of the large accountancy firms, Forty-fourth Report of Session 2012-13, HC 870, 26 April 2012, para 3, hereafter referred to as 'Role of the large accountancy firms' Back

9   Qq 139-143  Back

10   Q 137 Back

11   Committee of Public Accounts, HM Revenue & Customs: compliance and enforcement programme, Eighty-seventh Report of Session 2010-12, HC 1892, 24 May 2012,Qq 22, 33 Back

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Prepared 26 March 2015