Written evidence from Gordon Berry
Thank you very much for the opportunity to raise some questions.
I am a Chartered Certified Accountant and a Chartered Tax Adviser who has worked in Public Practice for over 25 years. I have a lot of experience of communicating with HMRC, previously the Inland Revenue and I am very concerned.
What I would like to focus on today is the use, by HMRC, of Behavioural Psychologists to influence the behaviour and thinking of UK citizens, without their explicit knowledge, that appears to operate out with the law and out with the remit of HMRC.
Four years ago, in December 2012, HMRC submitted evidence before the Public Accounts Committee about an experiment being conducted on citizens that had taken part in a tax avoidance strategy that HMRC frowned upon. HMRC did not prevent evidence to the Public Accounts Committee on why it did not agree that the Tax Strategy was sound and legal, HMRC did not prevent evidence on how it was going to litigate against that tax strategy nor did it provide evidence on how it expected to defeat that tax strategy in litigation or how it planned to close what it presumably believed was a gap in the law if that is what was required. Instead it provided evidence on slicing up this group of citizens into five different groups, the first four of which would receive differently worded letters, with the fifth acting as the control group, in an attempt to get the citizens to capitulate and withdraw from proceeding to litigation. All though HMRC did not directly draw it to the attention of the Public Accounts Committee, they were trying to use behavioural psychology to manipulate this group of citizens, to withdraw from exercising their rights under the law to have their case heard and to obtain certainty with their tax affairs. There is no evidence to suggest that this group of citizens would not have welcomed their case being heard in court and be prepared to accept the wisdom of the Judiciary as final and binding.
Four years down the line I would like to know what efforts have been made by HMRC to bring that particular tax strategy to litigation in order to defeat that group? Or are HMRC still employing mind games in the hope that these people will eventually throw in the towel and give up their civil rights to have the matter decided in Court? This is a very dangerous precedent.
In 2014 HMRC obtained the power to issue Accelerated Payment Notices (APN) to receive cash up front, having convinced parliament with evidence presented by Lin Homer in 2014 that citizens were delaying litigation in order to gain a cash advantage, despite knowing at that time that HMRC were deliberately delaying litigation in order to gain a cash advantage. Lin Homer also suggested before the Treasury committee that “The plan with accelerated payments is that we will serve notices and seek payment in cases where there has already been a tribunal decision either against the avoidance scheme they are in or in a similar case they have attached themselves to as a follow-up.” Despite this HMRC have managed to issue some tens of thousands of APN’s with little regard for their accuracy or the impact upon recipients, as witness on occasion by the need to withdraw APN’s but only after damage has been done. Now that HMRC can issue APN's, against which there is no formal right of appeal, and seek cash up front, where is HMRC incentive to litigate matters to a conclusion?
In 2010 an experiment commenced with what came to be known as the Behavioural Insights Team or 'nudge unit'. This is based upon behavioural science that suggests that people are not very good at making choices for themselves and this unit think of themselves as "choice architects" who help nudge people towards, according to their own website, "making better choices for themselves". Their thinking is that people are more Homer Simpson than Mr Spock. Behavioural Science of course comes from scientists like Pavlov, who trained dogs to salivate on command. Behavioural Science does not believe in free thought. This 'nudge' unit has carried out numerous experiments on taxpayers in conjunction with HMRC. This nudge unit was recently hived out into a private limited company, Behavioural Insights Limited. Their Accounts can be viewed at Companies House and they appear to have been very successful in their first two years, making an average of £1.8 million in profit each year, predominantly from the British taxpayer.
The public face of the nudge unit, Behavioural Insights Limited, is that they are simply helping taxpayers to not be late in paying their taxes, all very admirable. Behind the scenes the matter is much more sinister. This nudge unit has a team devoted to HMRC, it says so on the website www.behaviouralinsights.co.uk. Their job is to get you to change your mind. To remove your capacity for free thought and instead make better choices for yourself, of which they are the architects of the (much limited) choice(s) available. I can remember studying George Orwells book ‘1984’ in High School and I cannot help but be drawn to the parallels.
There is little doubt in my mind that these Behavioural Psychologists and Behavioural Economists are behind the scenes, helping to write letters and manipulate citizens whilst HMRC delay litigation and limit the choices available. Sadly, it is no small matter to play with people's minds. Any Psychologists will tell you that drawing matters out and removing certainty is one sure way to cause stress. An increase in stress will result in the body releasing cortisol and adrenaline. These chemicals are fine in small doses, but can be very harmful to the body over time and/or in large doses. The renowned Mayo Clinic suggest that "chronic stress can wreak havoc on your mind and body". They suggest that this can result in anxiety, depression, digestive problems, heart disease, sleep problems and weight gain. In this modern world, as we seek to combat mental illness, it has to be wholly wrong that HMRC are using Behavioural Psychologists to influence people's ability to think for themselves and express free thought and possibly damaging their mental and physical health as a result.
I am sure that the Behavioural Insights Team will present a very plausible public face. They are probably very persuasive. They are after all, psychologists, who believe that they know better than you, how you think.
I was very interested in the fact that a new law has been proposed by HMRC from 5th April 2019 to use retrospective taxation, something that the ICAEW described as follows: "We are very concerned about the proposals as they contravene generally accepted notions of fairness and break the constitutional convention against retrospective legislation, imposing tax charges in cases where taxpayers already had certainty that none were due.”. Why would HMRC choose a start date of 5th April 2019, some three years hence at the time of the announcement, and make no provision for putting a stop right now, today, to what one presumes they must see as abuse. From a psychological perspective I can only think of one reason, to create uncertainty and cause stress. If HMRC were so concerned why then has there been no law introduced immediately to outlaw the practice that they see as so abhorrent that they seek the power to tax transactions that happened in the past, that were lawful at the time they were carried out, and on which the Judiciary may even have already ruled?
I said at the outset that I have spent over 25 years in the arena of taxation. I was always taught, by the professional bodies and by my own teachers, that HMRC would operate within the law and if one had a dispute that could not be resolved by civilised discussion with HMRC, then ultimately our Courts would rule and bring certainty. I am concerned for the future of taxation in this Country when one finds oneself drawn to the conclusion that HMRC are conducting experiments that go well outside the scope of their care and management powers, in order to get a result they desire, regardless of the rule of law.
I thank you for taking the time to read this submission and consider the questions that it raises.