There has been a catalogue of errors at the taxman’s office in recent months. Her Majesty’s Revenue and Customs (HMRC) and the country’s top taxman (Dave Hartnett) came in for heavy criticism after it emerged that millions of people had been paying the wrong income tax (via PAYE) for two years. Exasperation turned to anger as the story evolved into accusations that top brass knew that there was a problem with the system for months before they took action and told those affected.
Millions of pounds of tax debts had to be written off, probably because it would be too time consuming and costly to try to recover any less than about £300 from those who had underpaid income tax in recent years. Millions more in unpaid taxes were then not collected because of rules preventing HMRC from chasing money that should have been paid more than four years ago. Just as taxpayers were reeling from this mammoth blunder, the taxman had to admit that further mistakes had been made, this time relating to National Insurance contributions. Further blushes followed. In the midst of all this Dave Hartnett initially refused to apologise when interviewed by the BBC, but later back tracked; Dame Leslie Strathie (Chief Executive of HMRC) then admitted the fiasco could continue for years and that her organisation had no idea about the true scale of the problem.
Stories of blunder, mismanagement and inefficiency are nothing new and many successful organisations at some point make mistakes, but the shambolic performance at HMRC calls into question whether or not it is fit for purpose. The true scale of turmoil at HMRC is only now coming to light as the organisation is quizzed about how and why such cataclysmic errors happened. When the PAYE scandal was first uncovered many people suddenly realised that they had no idea whether or not they had overpaid or underpaid – taxpayers rely on HMRC to work out their tax for them because it is so complex. And if the taxman can’t get his sums right then how can we mere mortals possibly be expected to? Our tax system is in desperate need of a very serious overhaul; we cannot continue with the current myriad of taxes, loopholes, credits and concessions. It’s not just HMRC that needs to change, it’s the system; it needs to be simpler and more transparent.
Andrew Tyrie MP recently said the very integrity of the tax system is at risk, after MPs were told that HMRC employs badly trained staff who regularly give out the wrong advice or do not know what they are talking about.
The 2020 Tax Commission has important work to do and the Government must listen to those who are proposing radical change. Unsatisfactory sticking plaster solutions can no longer hold together our tax system, real reform is needed.