HM REVENUE & CUSTOMS will see its resource budget decline 5% for the financial year 2015/16.
Chancellor George Osborne (pictured) delivered his Spending Review speech today in which he announced the cut. However, he hopes to increase resources to tackle tax evasion.
“Despite the fact that this department will see a 5% reduction in its resource budget, we are committed to extra resources to tackle tax evasion.
“The result is that we expect to raise over £1bn more in tax revenues from those who try and avoid paying their fair share.”
However, the cut was labelled “disappointing” by ICAEW chief executive Michael Izza.
“These could have significant implications on collecting money from tax payers as well as adding additional burdens to businesses, who already find interacting with HMRC a struggle,” he said.
The total departmental expenditure limit at HMRC estimates are: £3.7bn 2012/13; £3.6bn for 2013/14; and £3.4bn for 2014/15 for the year ended 31 March 2012.
HMRC estimates that the resource budget for 2011/12 was £4.6bn; for the fiscal year 2012/13 £4.7bn; for 2013/14 £4.5bn; and for 2014/15 £4.6bn -according to its annual report and accounts for the year ended 31 March 2012.
According to the notes accompanied with those accounts total departmental spending is the sum of the resource budget and the capital budget less depreciation.
A statement from HMRC said: “Our departmental budget reduction works out to be around £166m in 2015/16.
“We have to take our share of efficiencies but, recognising the vital and critical role of HMRC in bringing in the money, ministers have agreed that HMRC’s reduction is lower than most other departments.
“We will do more for less, bringing in an extra £24.5bn by 2015/16 through even more effective policing of the tax rules.
PwC tax partner Alex Henderson claims the chancellor was ‘unclear’ how much more resources would be dished out to tackle tax evasion, other than what has already been committed.
“More HMRC resources are always a sensible move for the chancellor as HMRC is the revenue raising part of government. These resources will be focused on tackling tax evasion which is a criminal activity,” he added.
“The big unanswered question is what will happen in 2015? Whoever is chancellor in 2015 will have a strong temptation to introduce a noticeable tax rise in one of the big three taxes – income tax, national insurance or VAT.”
However in defence of the chancellor’s speech, Saffery Champness partner Ronnie Ludwig highlighted Osborne may have realised the focus for government should be on evasion and not avoidance by multinational corporations.
“Perhaps the government has at last learned that in order to tackle avoidance you need to change the law rather than suggest that multinational companies have a moral obligation to pay more. This would empower HMRC to take action. The laws are already in place to tackle evasion, which is illegal, and the additional resource will be welcome news to HMRC and the public generally,” he said.