By Chas Roy-Chowdhury, head of tax, ACCA
While everyone else was watching the phone-hacking debate in the Commons yesterday, I was at the much more exciting ‘Administration and effectiveness of HMRC: Closing the tax gap’ Treasury Sub-Committee alongside witnesses from the ICAEW, CIOT, and Taxaid.
Here’s a quick summary of some of our evidence.
We all agreed that taxpayers in general do try and be compliant. They are sometimes stifled by paperwork and get things wrong due to the complexity of the tax system. We need to urgently pursue tax simplification in order to facilitate compliance.
We agreed that at the top level of HMRC where we are generally engaged, we’ve [the institutes] been able to provide some constructive criticism and have hopefully helped make the tax system work better. But it is at the coal face, where ordinary members of HMRC deal with the routine tax work of accountants, that things do not appear to be working well and effectively.
One of the lines of questioning the MPs looked at was the NAO report dealing with the HMRC accounts for 2010/11, published on 8 July. The NAO had suggested that when it came to tax settlements with large businesses, we should have a separation of process where any HMRC Commissioner involved in the negotiations with the business should not also be a part of the signing off of the agreed settlement.
I felt that so long as there was no duplication of effort, such an approach would be fine; David Heaton of the ICAEW seemed to agree. The CIOT and Office of Tax Simplification’s John Whiting felt that, for perception reasons, there should be two commissioners involved who had not been a part of the negotiations involved in the signing off process.
The second major discussion point was how exactly the tax gap could be calculated. We agreed that the elements used to compose the tax gap may not be entirely appropriate or easy to quantify. For example, I considered that the inclusion of legal interpretation or avoidance being included would make tax gap calculations a highly subjective process open major differences in interpretation.