26 Mar Throwing yet more money at HMRC is not the answer to the tax gap
The Government investing £300 million over the next 5 years into HMRC will not scratch the surface to tackle the tax gap without a proper strategy on the UK’s overly complex tax system, say leading audit, tax and business advisory firm, Blick Rothenberg.
Nimesh Shah, CEO of the firm, said: “The Government’s plans to invest £300 million over the next 5 years into HMRC will not scratch the surface to tackle the tax gap, and claims of a three-fold return on investment in additional tax revenue seem incredibly ambitious when HMRC has received such a slating by the Government and the Public Accounts Committee.”
He added: “Over the last decade, the Government has poured record levels of funding into HMRC, as well increased legislative powers to tackle tax evasion and aggressive tax avoidance. Over the last 3 years, the Government has announced additional funding to HMRC of c.£1.4 billion – to support tax compliance efforts, tackle more serious cases of tax fraud and to manage tax debts. Despite the increased investment in recent years, the tax gap remains at around 5% – a level which has been broadly maintained since 2017/18. But as tax revenues have increased, the absolute amount of the tax gap at £40 billion has never been higher.”
Nimesh said: “With the UK facing the highest tax burden in 50 years, there remains a major doubt at HMRC’s ability to actually to properly focus its time and efforts to collect the right amount of tax. It is fine for the government to increases taxes as they see appropriate, but I fear that HMRC’s lack of accountability and drive to ultimately collect tax means the absolute tax gap increases further.”
He added: “The Government has today announced a further 500 HMRC compliance officers (in addition to the 5,000 additional personnel announced at the Autumn Budget) and 600 additional HMRC debt management staff. The Government has also said it will continue to invest in digitisation and work with businesses to modernise the tax system. This all sounds very sensible, but HMRC customer service and standards are at an all-time low, with regular stories of shutting down phone lines and taxpayers not being able to access the right information. There is significant work to do for HMRC before we can have any confidence that the Government will raise anywhere near the amounts it is projecting.”
Nimesh said: “The Government needs a proper strategy on tax and the future direction of HMRC – piecemeal investment and associated claims of generating vast sums of additional tax revenue does not offer any confidence for the taxpayer that the tax gap issue will be properly addressed in the long-term. The major issue remains the complexity of the UK’s tax system – the longest tax code in the world. And I am sympathetic towards HMRC that it simply cannot keep up with the swathes of new legislation.”
He added: “A tax reforming future Chancellor would take a step back and develop a long-term and sustainable strategy – history suggests that throwing money at HMRC will not address the problem.”
