HMRC: new recommendations on tax transparency, customer service, more

2 December 2016

The Public Accounts Committee publishes its annual examination of HMRC's performance, setting out new recommendations to safeguard taxpayers' interests across a range of the authority's activities.

Report findings

The report identifies areas of concern relating to customer service, the tax gap, tax reliefs and the tax affairs of multinational companies.

In particular, the Committee is not convinced HM Revenue & Customs (HMRC) has a credible plan to make savings without damaging customer service and calls for urgent action to address this.

It warns that HMRC "is staking a great deal on the success of its plans to digitise the tax system" but has not agreed contingency measures with the Treasury should its projections about demand prove inaccurate.

"Unnecessary hardship and suffering" due to Concentrix

The Committee calls on HMRC to demonstrate by March next year that it has an adequate plan to safeguard against a further "disastrous decline" in customer service while meeting the challenges of cutting spending, restructuring its business, replacing a major IT contract, relocating most of its staff and dealing with the implications of Brexit.

The Committee again highlights the "unnecessary hardship and suffering" faced by tax credit claimants as a result of HMRC's contract with Concentrix and urges the authority to identify quickly and act on lessons learned.

On tax transparency, a key theme for the Committee, it concludes tax reliefs are still not sufficiently visible to support public debate and scrutiny in Parliament and calls for an analysis of such reliefs and their costs to be included in HMRC's annual report.

Reiterated calls for transparency of large multinationals' tax affairs

The Committee reiterates its call for greater transparency in the tax affairs of large multinationals "to increase the pressure on them to pay their fair share of tax".

It urges HMRC and the Treasury to lead the global debate for public country-by-country reporting, and push for international agreement on its introduction.

The power to require such reporting was set out in UK law following work by members of the Committee to promote an amendment to the Finance Bill 2016.

However, while HMRC is soon to receive country-by-country reports on the global activities of large multinationals doing business in the UK, these will be supplied in confidence and will not increase transparency over the tax affairs of these companies.

Chair's comments

Meg Hillier MP, Chair of the PAC, said:

"The public and Parliament rightly have high expectations of HMRC which plays a vital role in national life.
It is therefore disconcerting that again we must raise concerns about the authority's customer service and transparency in the tax system.
The lack of a convincing fall-back plan to safeguard service as HMRC undergoes significant change remains a looming threat to its ability to collect tax from individuals simply trying to pay their fair share.
HMRC's senior management cannot afford to be complacent about the catastrophic collapse in customer service in 2014–15 and the first half of 2015–16, nor about what is at stake should their projections about demand for call centres prove wrong.
Contingency planning should not be an optional extra. By the Spring we will expect to see evidence that HMRC has agreed measures with the Treasury to ensure it is not left playing 'catch-up' at taxpayers' expense.
We welcome HMRC's admission that it must improve the way it handles complaints, which it must do in tandem with keeping a grip on telephone answering times.
We also look forward to meaningful action to prevent a repeat of the failings embodied by its contract with Concentrix—a venture with appalling human consequences, about which much has already been said by our Committee and elsewhere.
More broadly, we continue to urge HMRC to do more to improve transparency around its work at home and within the wider tax system.
HMRC doesn't systematically collect and analyse data on tax reliefs, for example—a startling omission given their direct relationship to the overall level of tax collected.
Our Committee is hosting a global summit on tax transparency on December 9, bringing together Parliamentarians from nearly 30 tax jurisdictions around the world.
A key aim of the event will be to work towards an agreement on a concordat outlining how Parliamentarians will hold Governments to account on tax transparency.
It is another important step in our work to bring greater transparency to the tax affairs of multinational companies.
We call on HMRC to build on the work of our Committee, drive the debate internationally about public country-by-country reporting and push for real change in the global tax system."

Report summary

Our examination of HM Revenue & Customs' (HMRC's) performance has identified a number of matters of concern, some of which we have raised before.

HMRC is relying on new digital services to transform its business and reduce demand on its call centres. Making a success of this is vital to safeguarding tax revenues and ensuring an acceptable level of customer service.

It is therefore essential that HMRC avoids repeating the mistakes it made two years ago when it reduced the number of staff in its personal tax service prematurely, resulting in a disastrous decline in customer service.

Concentrix contract has been a "complete failure"

We remain concerned that HMRC does not scrutinise effectively whether tax reliefs are being used as intended or provide Parliament with sufficient information on the costs of tax reliefs and their effectiveness.

HMRC's contract with Concentrix to investigate cases of potential fraud and error has been a complete failure.

Concentrix's actions have resulted in many tax credit claimants being wrongly accused of fraudulent claims and so losing their payments causing unnecessary distress and hardship.

Lessons must be learned from Concentrix contract

HMRC must ensure that lessons are learned from how this contract was designed and managed to make sure that such an unacceptable breakdown in service is not repeated.

We welcome the introduction of country-by-country reporting of the activities of multinational companies, but this will not provide the much needed transparency over their tax affairs as the information will be supplied to HMRC on a confidential basis.

Further information

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