The Treasury Committee's report considers HMRC's past work in ensuring tax compliance and concludes that while progress has been made, there is still work to be done.
The report concludes that:
- Enabling voluntary compliance is the most efficient way of closing the tax gap, and HMRC must ensure that all those who wish to comply with their tax obligations are able to do so. Part of the process of encouraging voluntary compliance is demonstrating that HMRC treats all taxpayers fairly, whether they are individuals, small businesses, or large corporations. The tax system should be simplified to make compliance easier.
- Despite past errors, HMRC's recent announcement of ways it intends to improve its processes for settling tax disputes is a step forward in the context of wider questions needing to be answered about the accountability structures of HMRC.
- HMRC's calculation of the tax gap is flawed and risks focusing the minds of its employees on the wrong task: maximising revenue at all cost rather than ensuring that all taxpayers pay the right amount of tax. The Committee is seeking views on whether there is any value in HMRC continuing to publish the tax gap as an aggregate figure.
The Sub-Committee Chair, Mr George Mudie MP, said:
"HMRC has done some good work in ensuring tax compliance but there is still a long way to go if the tax gap is to be significantly reduced. Taxpayers must have confidence that HMRC is being even-handed at all times, otherwise rates of voluntary compliance with the tax code could suffer.
It is encouraging that HMRC has recognised that its processes for settling tax disputes were flawed and is implementing changes. However, serious questions remain about accountability and transparency with respect to HMRC's governance, both at Ministerial level and at Board level."