PAC praises HMRC but scrutiny remains high

In the first meeting between HMRC officials and the new parliament’s Public Accounts Committee (PAC), MPs praised the Revenue’s work but called for urgent improvements to customer service and transparency

Labour MP Meg Hillier, who replaced Margaret Hodge as the PAC’s chair, opened proceedings by telling HMRC permanent secretary Lin Homer “there are areas that we can congratulate [HMRC] on”.

However, as the new committee got into its stride, a catalogue of old (and well documented) bugbears was presented. The same frustrations with HMRC’s transparency, customer service and criminal prosecution levels did not take long to surface.

David Mowat, new to the PAC, launched staunch criticism of HMRC’s record for answering phones and letters. He told Homer that he received “a lot of complaints” from his constituents about the Revenue’s customer service, and said that other MPs did too.

Homer said that HMRC was responding to these issues by improving its online and digital offerings, and acknowledged that customer service was one of HMRC’s most important aspects.

“We know it encourages voluntary compliance if HMRC is easy to deal with,” said Homer, before adding, “[But] we can’t fix customer service without investing in technology.”

PAC veteran Stephen Phillips berated both Homer and Jennie Grainger, HMRC’s director of general enforcement and compliance, over the Revenue’s sustained low prosecution levels.

Returning to unfinished business from the last parliament, Phillips pressed Homer and Grainger on the number of prosecutions that occurred as a result of information supplied by HSBC whistleblower Herve Falciani.

Despite £800m being pumped into HMRC in the Summer Budget for investigative purposes, both were forced to admit that only one prosecution had taken place from a list naming thousands.

Evasion matters were quizzed further by Richard Bacon, another old hand, who asked what the Revenue was doing to counter offshore tax evasion. Homer and Grainger replied by saying that efforts were being stepped up.

‘Offshore evasion is a really difficult area to work in,” Homer said. “By 2017 we will have 94 countries exchanging data. Once we have those numbers, it will be much more difficult for offshore evaders to hide.”

Talking to economia, Hillier explained that this first meeting between the new PAC line-up and HMRC was an important signposting of the issues that MPs wanted to focus on.

“Customer service is a big issue. As a committee, we get more letters about than anything else,” she said. “Backbench MPs raise it a lot with me as well.”

She said that, in many cases, there were distances between the differing realities of HMRC and the taxpayer.

The Revenue’s annual report had come under scrutiny throughout the meeting for not being wholly transparent regarding cash raised through pursuing tax evasion and avoidance. Other issues, she continued, include matters concerning tax reliefs, a bone of contention left over from the previous government.

Hillier said, “HMRC needs to make its annual report as clear as possible, so it isn’t seen to be overstating what revenue it is getting in.

“Our concerns about tax reliefs are cause for disagreement between the committee and HMRC,” she added. “We think tax reliefs are a huge area to look at, and that they pose a challenge for HMRC.”

Throughout the exchange, it was clear there had been a shift away from the witch-hunt hearings that made former PAC chair Hodge infamous. Hillier, the MP for Hackney South and Shoreditch, acts more like a coordinator than an aggressor.

“I’m playing to the strengths of the committee,” Hillier explained. “As a committee we need to work very well together.”

It wasn’t all bad news for HMRC, either. Hillier said the Revenue had excelled in making changes to its organisational structure – especially compared to other governmental departments – but added that the benchmark was “quite low”.

“HMRC has got to be effective, and we want to give them some credit,” Hillier said. “They’re going through one of the most important change programmes in government and they’ve made some progress – praise where praise is due.”