Understanding tax defaulters.
On missing the tax self-assessment deadline.
Everyone knows that there are supposedly two certainties in life – death and tax. (Someone once pointed out that the difference between the two was that death wasn’t an annual event.) But could another candidate for fiscal certainty be that multitudes will miss the 31 January deadline? Consider the evidence. In each of the first two years of self-assessment, some 650,000 returns were late. The number of late returns actually went up in year two, suggesting that we don’t learn – or, of course, that life gets ever more difficult. With three million returns still outstanding at the beginning of January, it’s a fair bet that, despite hernia-inducing sackloads of mail arriving at tax offices and floods of personal callers taking advantage of the Revenue’s effective extension of the deadline to 1 February (as reported in December’s Tax Bulletin) many thousands will supplement the Chancellor’s revenues with £100 penalties. What is going on? Perhaps I should wait until the numbers of defaulters are known, but can I suggest that if the numbers have risen again – or even if they remain the same – then the Revenue has a problem. If one in 13 ‘customers’ fail to comply with their obligations, is the system all it should be? There are reasons for people missing the deadline. For instance, those returns that are just so complex they need more time. But what does the Revenue make of the legions of defaulters? What does it think the reasons are for the missing returns? What proportion are the fiscal recidivists? The admin mistakes? Human nature? How many are finding it all too difficult – which might imply a lesson for parliament? How many need help and can’t afford it (perhaps a lot – look at the work of the Low Incomes Tax Reform Group)? Once the dust has settled from 31 January, even if the number of penalties has dropped significantly, let’s have some work – jointly – on the reasons for the defaults. There will be lessons for all. But the authorities must appreciate that a system that penalises so many users could just fall into disrepute. – John Whiting is a tax partner at PricewaterhouseCoopers and vice president of the Chartered Institute of Taxation.