The government has been urged to combine the boards of the Inland Revenue and Customs & Excise in a radical move to create a single Department of Taxation.
In the same week that the Bill to merge the Revenue and the Contributions Agency received Royal Assent, the Commons Treasury committee was told further cost savings could be achieved by bringing the tax responsibilities of Customs within the Revenue’s remit.
Edward Troup, head of tax strategy at Simmons and Simmons and a former special adviser to the Treasury under the last government, warned MPs that co-operation between the staffs of the two Revenue departments had not brought significant benefits because of the difference in attitude and working practices of the two bodies.
Britain was ‘unique’ in retaining two separate Revenue departments, requiring businesses to make returns to two different bodies.
‘Compliance burdens, and hence costs for the economy as a whole, have increased and there is little prospect of any real reduction in the immediate future,’ said Troup.
‘The separation of the tax-collection functions of the two departments is the single greatest inefficiency in the tax-assessment and collection system,’ he added.
In separate evidence to the committee, English ICA senior tax technical manager Francesca Lagerberg said co-operation between the departments would not impact on the majority of small businesses because large numbers were below the threshold for VAT registration.
PricewaterhouseCoopers tax partner John Whiting, chairman of the Chartered Institute of Taxation’s tax administration committee, called for a Royal Commission on tax ‘to address the complexities in the tax system and how they can be overcome’.
He called for the harmonisation of PAYE and NIC systems, starting with a definition of earnings and moving to the combination of income tax and NICs into one charge. This, said Whiting, ‘offers the greatest scope for tax simplification’.
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