Calling Revenue to task

The embarrassing tale of Michael Allcock is set to rumble on for the Inland Revenue despite last week’s publication of a National Audit Office report on the scandal.

On 7 December, an NAO team headed by Comptroller and Auditor General Sir John Bourn will present the report to Parliament’s powerful financial watchdog the Public Accounts Committee. The Inland Revenue must defend its actions.

One question is almost certain to be on the lips of committee members: ‘Who was responsible for Allcock?’

The 57-page NAO report teases the reader with a shadowy list of high-ranking Revenue officials who ‘managed’ Allcock between 1987 and 1992, the years when he accepted lavish bribes – including foreign holidays, cash bungs and the services of a prostitute – from rich foreign taxpayers known as ghosts. One has dies, two retired and one resigned. The rest still work in the Revenue.

Allcock, jailed for five years last February, was a senior inspector in the Revenue’s Special Compliance Office. Widely-regarded as a maverick, Allcock’s shenanigans went unchecked as he hauled in tax settlements totalling up to #20m a year.

The report concludes that while there were a series of ‘errors of judgement, there was no basis for taking formal disciplinary proceedings’ under the current disciplinary code. No formal interviews were held with the managers and the managers who have left the Revenue have not been contacted yet.

Systems have been tightened since the abuses came to light. A joint review by the NAO and the Revenue’s internal audit team confirmed that the new control environment provides a framework for much firmer control than under Allcock’s regime.

No system can be foolproof against a devious and corrupt rogue bent on filling his own pockets, the Revenue admits, but any budding Allcock in the SCO will have a far harder time in future.

What the Revenue needs to do, tax experts say, is rebuild its crumbled reputation.

Tom Murray, head of tax investigations at KPMG, says: ‘Given that the Revenue is trying to be more forceful, it needs to allay the fears of the public. The public needs to know there is a consistent and more ethical approach.

‘You have to question its role as an organisation acting for the government and at the same time effectively being a policeman.’

Murray’s view is echoed by John Gwyer, Levy Gee’s tax investigations partner. He adds: ‘The Revenue can’t go on policing itself and dealing with its own complaints. There needs to be an independent body, such as the NAO, dealing with such situations.’

Gwyer, who spent 23 years at the Revenue, gives a unique insight into the Revenue’s complaints procedure. ‘One of the real difficulties of the Allcock case was that when complaints were made about his behaviour they tended to be dismissed and Allcock was aggressively defended.’

Allcock’s teflon coating also protected his colleagues, a number of whom were entangled in his web of corruption.

For the first time, the NAO’s work reveals the full extent of corruption within the Revenue department.

Five other tax inspectors who worked with Allcock – including one of his line managers – also broke the Revenue’s conduct and discipline code and were demoted, fined up to #3,750 and given pay cuts of up to #8,000. Some of their misdemeanours, including preparing false accounts, accepting excessive hospitality and expenses abuses, did not come to light until four years after Allcock was suspended.

The Revenue refuses to say whether the staff, who all remain anonymous thanks to the Revenue’s cloak of secrecy, are still involved in tax investigations work. It is, says a spokesman, a matter that cannot be discussed until after the December PAC meeting. No doubt PAC chairman David Davis will be keen to ask the question when the committee convenes.

Levy Gee’s Gwyer is sure the officers are still involved in investigations work and argues they got off far too lightly. ‘They have been found guilty of serious breaches of internal discipline and some of their behaviour was corrupt. Why weren’t they dismissed. A gentle slap on the wrist like that out all the wrong signals to other staff working in the Revenue.’

Much of the potential evidence against Allcock, who was found guilty on just six of the 17 charges brought against him, was lost due to poor file security and lax documentation methods. New file security measures are just one measure introduced by the Revenue in a bid to clean up its act.

Rotation of senior staff to new areas is designed to cut the risk of corruption going unchallenged, although the SCO still does not have a formal policy for moving investigators on to new duties after a specified time in a post.

The NAO’s call for postings of between five and seven years is just one of the recommendations, along with improved staff vetting and better understanding of expected standards, under Revenue scrutiny.

The PAC will be keen to hear in four months time if the revenue plans to listen to the NAO.