"Her Majesty’s Revenue and Customs is no longer fit for purpose. A lack of resources and its closeness to big business mean it is unable to maximise tax revenues, provide a good service to taxpayers or adequately enforce tax laws – its fundamental requirements. Deep reforms are needed to make it fit for the 21st century.
A lack of resources has thwarted HMRC. In 2005 it had a budget of £4.4bncompared with £3.2bn in 2015-16. In 2004, it had a staff of 100,000, which declined to 60,000 by March this year, and there are plans to reduce staff to below 50,000, and possibly as low as 41,000, by the early 2020s. Local tax offices are being replaced by call centres, and IT systems have failed to deliver. Over 25% of calls from taxpayers go either unanswered or get a busy tone. Yet every £1 cut from its telephone services results in an estimated £4 in additional costs to taxpayers. This has fuelled dissatisfaction with the quality of service provided by HMRC.
A resource-starved HMRC can only investigate about 35 wealthy individuals a year for tax evasion. There have been only 13 offshore-specific prosecutions since 2009. It has 81 specialists to investigate transfer pricing practices – a major tool for tax avoidance by multinational corporations. Investigating just one multinational company can take 10-30 staff up to 22 months, leaving precious little resources for anything else.
Despite parliamentary hearings on the tax practices of Google, Microsoft, Amazon, Apple and Starbucks, there is a dearth of legal test cases involving large companies. There is a temptation to let the lying dogs sleep. A good example of this is the information provided by whistleblower Hervé Falciani, which showed that HSBC’s Swiss operations might have helped wealthy people to dodge taxes. Only one individual from the Falciani list of some 3,600 potential UK tax evaders has been prosecuted. In January, HMRC quietly abandoned its investigation."
The full article can be read here.