Split Customs, don’t merge it

The Treasury Committee of the House of Commons has recently published a voluminous report on Customs & Excise. It looks principally at an issue which has been frequently discussed elsewhere – including in the pages of Accountancy Age – that is, the idea of a merger between Customs & Excise and the Inland Revenue.

Clearly, the committee hankers after such a merger. It complains about the slow pace of the so-called Closer Working Programme, introduced in 1993. It says that there is no recent definitive study of the cost and benefits of merging Customs and the Revenue, and recommends that government has another look at this. It adds that until such a study has been carried out, the government?s presumption against merging these departments is not well-founded.

But the committee is wrong. There is no case whatsoever for merging the Inland Revenue and Customs & Excise, save on relatively limited grounds of minimised ? if they are minimised ? compliance and collection costs. It may be that, from the outside, the departments seem similar. In fact they fulfil a large variety of totally different functions.

Instead of looking at this issue narrowly, the Select Committee should have examined exactly what Customs and the Revenue really do, and made recommendations as to how they might be re-formulated to meet the needs of the 21st century. They should have recommended a study not of a merger, but of a break-up.

Anti-smuggling, frontier controls, anti-drug and anti-pornography measures and so on, should go from Customs to the Home Office alongside the Immigration Service.

VAT should go to the DTI, as should the Inland Revenue?s tasks in respect of company and corporation tax, both important elements in the environment in which business and industry works. The Valuation Office should go to the DETR, as has already been promised.

Most importantly, the Inland Revenue?s dealings with persons ? in relation to income tax and NICs ? should be joined up with the Department of Social Security?s dealings with benefits, so as to facilitate an overall view of the financial relationship between the state and the individual.

The Select Committee is pointing down a blind alley. So let us hope that the government, which is said by some to be intent on radical thinking about the way our public services are delivered, will respond by directing it in more profitable directions.

  • Sir Peter Kemp is chief executive of the Foundation for Accountancy and Financial Management

Related reading