TaxPersonal TaxOpinion – View from the House.

Opinion - View from the House.

The appearance of Nicholas Montagu, chairman of the Inland Revenue, before the powerful, all-party Treasury Select Committee of the House of Commons last week once more raises the spectre of a possible merger between the Revenue and Customs.

The government made plain, within months of Labour’s landslide victory in 1997 that this was an option (also tentatively raised by the previous Tory government) that was receiving serious consideration. Ministers, like their Tory predecessors, thought it would cut costs and reduce bureaucracy for British industry.

The Select Committee itself, earlier this year, was wholeheartedly in favour of a merger, insisting companies would save millions of pounds a year in compliance costs and that tax fraud would be drastically reduced.

Not content with that, the committee also launched a scathing attack on Customs for what MPs considered the slow pace of reform. And they accused Customs of dragging their feet over the explosion in tobacco smuggling which is costing the Treasury billions of pounds a year in lost duty.

But now any enthusiasm the government may have had for a merger seems to be very much on the wane.

Dawn Primarolo has been making decidedly cool noises about it. This may not be unconnected with the fear that a prospective merger would spark off a huge public row with the relevant trade unions at a time when a general election may be only months away. This is the last thing ministers want.

The unions insist the two departments operate differently, with the Revenue handling direct taxes on wages and profits, while Customs is responsible for indirect taxes such as VAT on goods and services.

Tax experts regard these arguments as no more than quibbles. But whatever the benefits of a merger the government is not prepared to embark on a gratuitous ‘war’ at such a sensitive time in the parliamentary calendar.

Even so, there is a feeling at Westminster that such a merger will inevitably take place – later rather than sooner, despite union opposition and Customs reluctance.

After all, Britain is unusual, if not unique, in being one of the few nations in which has two national tax collecting departments.

– Chris Moncrieff is senior political analyst at PA news.

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