Enter Your E-mail

Mark McLaughlin asks if HM Revenue & Customs' mission is to collect the right amount of tax or just as much as it can get from taxpayers.

I was intrigued to read Chancellor of the Exchequer George Osborne's recent letter to HM Revenue & Customs' Chief Executive Lin Homer, which is headed 'Remit for HM Revenue & Customs 2012-13'.

This letter sets out the Chancellor's priorities for HM Revenue & Customs (HMRC) in the areas of improving tax collection, delivering cost reductions, improving services for individual and business customers, Real Time Information and tax policy and the policy partnership.

It was the first of these areas. improving tax collection, which really caught my eye, and in particular the following statements by the Chancellor:

"At the Spending Review, I set an ambitious target for HMRC to increase tax revenues brought in by compliance activity by a further £7bn per annum by 14-15..."

and

"Maximising additional revenues in 12-13 and achieving a sustained reduction in the tax gap continues to be my highest priority for you in the coming year. The Department's Spending Review settlement allocated £917 million of efficiency savings to be reinvested over the four year period into tackling tax avoidance, evasion and criminal attack. Over the course of the next year, I expect HMRC to secure at least £17bn in additional revenue, of which £4 billion will be collected as a result of the additional investment."

Both statements cause me concern.

What worries me about both statements is that nowhere in the Chancellor's letter does he refer to ensuring that HMRC collects what HMRC often refers to as "the right amount of tax", which I have always assumed to mean the tax which is properly due from each taxpayer by applying the tax law. Mr Osborne's letter refers to reducing "the deficit" or "the tax gap". However, if the Government or HMRC have ever produced concrete evidence that the "tax gap" is as great as they would have us all believe, I have yet to see it.

The Chancellor wants HMRC to collect an additional £7 billion per annum in compliance revenue. Is £7 billion "the right amount of tax" from this activity? In addition, what evidence exists that HMRC can legitimately collect £17 billion in additional revenue from tackling "tax avoidance, evasion and criminal attack"?

On the face of it, the Government seems to be placing HMRC in the invidious position of collecting the maximum amount of tax from taxpayers to achieve the targets that the Government has set for them, as opposed to "the right amount of tax".

But then I expect that some taxpayers would probably respond by saying "no change there, then".

The Chancellor's full remit letter can be downloaded from HMRC's website: Remit for HM Revenue & Customs 2012 - 13

Best wishes,

Mark McLaughlin

Managing Editor