Friday, January 12, 2018
The UK's Public Accounts Committee has published its annual report into the performance of the UK tax agency, HM Revenue and Customs (HMRC).
The report said, with Brexit around the corner, the agency faces additional pressures and is having to consider how to change its priorities. However, it was praised for improving tax collections and taxpayer services.
The report said, together with HM Treasury, HMRC has to make tough decisions on how it allocates limited resources to its operations to increase tax revenues, protect performance levels, prioritize its transformation and estate programs, and invest in measures to tackle tax evasion, fraud, and error.
"We are particularly concerned about the impacts on the ordinary taxpayer from the growing challenges facing HMRC, and whether HMRC is doing enough to support vulnerable Tax Credits recipients, especially as they transfer to Universal Credit," it said, adding: "There is a lack of incentive for HMRC to reduce Tax Credits fraud and error in the transition period to Universal Credit."
According to the report, in 2016-17, HM Revenue and Customs (HMRC) raised GBP574.9bn (USD786bn) in revenue, an increase of GBP38.1bn (7.1 percent) on 2015-16. The estimated tax gap (the amount that went uncollected) has fallen from 7.9 percent in 2005-06 to six percent in 2015-16, and HMRC's estimate of error and fraud resulting in Tax Credits overpayments increased to 5.5 percent (GBP1.57bn) in 2015-16 (the most recent year available), from 4.8 percent in 2014-15.
The cost of running HMRC in 2016-17 was GBP3.3bn, up from GBP3.2bn in 2015-16. In 2016-17, HMRC improved its customer service by handling 92 percent of calls, compared to 72 percent in 2015-16. However, it drew criticism concerning call answering times. It was said that HMRC now takes four minutes to answer calls, compared with 12 minutes previously. However, this was said to be misleading; it was noted that HMRC now plays automated messages to callers and registers only the remaining time for the purposes of collating figures.
It was noted that HMRC transformation plans include 15 major programs, including closing its national network of offices and relocating to 13 large regional centers, introducing new digital services for individuals and businesses, and updating major systems such as the Customs Declaration Service.
The Committee put forward a number of tax policy recommendations for the agency. It said HMRC should obtain the information from the "Paradise Papers" as soon as possible, and report back to the Committee by March 2018 to set out its response, including any additional revenue likely to be at stake.
In addition, it said HMRC should set out its approach to Brexit tax issues, how it intends to tackle tax credit error and fraud, and should set target levels for reducing the tax gap, including for the SME sector.