HMRC budget cuts are "economics of the playground"

THE TREASURY IS participating in the “economics of the playground” by cutting the budget of HM Revenue & Customs, the head of the tax inspection trade body has said.

Graham Black, who is the president of the Association of Revenue and Customs, said that there was no rational basis for the Treasury to cut HMRC’s budget, which it was only doing to send a message to other government departments. He said that cuts disproportionately affect HMRC’s core compliance work, which generates revenue – the only government department to do so.

The ARC said that investing an extra £260m over the next few years would reduce the estimated £50bn tax gap by £6bn over the next four years. It estimated that an additional 100 customer relationship managers would extend the model to a further 1000 large businesses at a cost of £24m. A further 150 specialists, such as senior corporate tax specialists and senior tax professionals would be able to challenge large businesses’ tax returns and avoidance at a cost of £36m.

Speaking at the ‘Tackling the Tax Gap’ seminar at the House of Commons, Black said that these specialists should be recruited at the market rate.

But Conservative MP Mark Garnier, who is a member of the Treasury select committee, said that there should be proper costings about how much tax take further investment will bring in.

At the same event, shadow Treasury minister David Hanson warned that simplification of the tax system “should not be a euphemism for tax cuts”.

He said there are still “50 or 60” countries that the UK does not have tax agreements with, and this will need more legislation not simplification – however, “this would increase the tax take”, he added.

Green Party MP Caroline Lucas chaired the debate, and she will be introducing legislation to make companies’ tax bills more transparent.

Liberal Democrat peer Lord Oakeshott said it is unclear how new legislation, such as the tax compliance code, is affecting companies’ behaviour “because HMRC refuses to discuss individual tax matters”. Transparency would increase tax take, he added.