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KEY POINTS
- The US Taxpayer Advocate Service.
- Its purpose in navigating the tax system.
- The difference between an adjudicator and an advocate.
- The advocate's role in addressing 'broader' tax issues.
- The advocate's relationship with the revenue department.
I have recently returned from my annual trip to Chicago (the Illinois CPA Society's 'Business & Technology Solutions Show' which is my annual update on US tax, the Chicago Jazz Festival, and taking in the Cubs at Wrigley Field). The Internal Revenue Service (the US version of HMRC) had a stand at the technology show. They didn't have one last year, but had one for the previous six or seven years; however, it had dealt with one thing only — electronic filing. Presumably the 'Land of the Free' would not put up with the Tony Blair/Gordon Brown compulsion that has been accepted here by a supine Parliament, so the IRS has to rely on persuasion. This year's stand was again on a single issue — but not electronic filing; instead it was the Taxpayer Advocate Service.
The IRS also had a stand at the Jazz Festival. It was pushing two things; electronic filing and the Taxpayer Advocate Service.
What about us?
I have been trying to persuade anyone at 100 Parliament Street (the HQ of HMRC) who will listen that the UK ought to introduce a Taxpayer Advocate Service, but I fear I have had no success. As it now seems to be the flavour of the month in the US, I have prevailed on the editor to let me promote its benefits in the hope that I can interest some readers to join me in seeking a UK equivalent.
We handle tax problems that are even harder to get through. Troublesome Tax Issues? Can't see the Forest for the Trees? Contact TAS! It's Free! These are the titles of the two booklets that I picked up at the Jazz Festival. I hope that I don't get sued by the IRS for breach of copyright, but I thought that the first page of the first of these leaflets explains the service much better than I could.
'If you've tried everything to resolve a tax problem on your own, but keep running into one obstacle after another turn to the Taxpayer Advocate Service (TAS). We're an independent organisation within the IRS with over 2,000 employees … Get a personal Taxpayer Advocate assigned to your case. Our Advocates are trained to protect taxpayer rights and reduce tax problems by helping you:
- Understand your problem
- Navigate the system
- Appropriately resolve your issue.'
Does this sound much like the Revenue Adjudicator? No way! They are a million miles apart. The Adjudicator's role is to adjudicate; to listen to a taxpayer's complaint and the HMRC justification and then decide whether or not HMRC have followed their own internal rules. The Advocate's role is to remove the frustrations that are preventing the taxpayer and tax authority from reaching an agreement. He works with the taxpayer, suggesting ways to satisfy the IRS's demands for documents, explains what is happening through the process, talks to the IRS officer about what the taxpayer has not been able to get over to him, and generally holds the taxpayer's hand through the process. The Adjudicator steps in where a case is unsatisfactorily resolved; whereas the Advocate helps to resolve it; his aim is to prevent the taxpayer ever feeling dissatisfied ... or as the leaflet goes on to explain:
'Qualified taxpayers will receive personalised service from one of our knowledgeable Advocates. He or she will listen to your situation, help you understand what needs to be done to resolve it, and stand by you every step of the way until your problem is gone. Because we're a part of the IRS, our Advocates are experienced in the business. They know the system and how to navigate it. They are impartial and will work on your case until it's finalised — so you can move on with your life'.
Who is it for?
Which taxpayers qualify to use the service? The other leaflet tells me that a taxpayer can use the service:
(a) in situations where IRS action prevents him from providing for necessities such as housing, transportation or food;
(b) if he owns a business and is unable to meet basic expenses such as payroll;
(c) if he faces a delay of more than 30 days to resolve a tax related problem; or
(d) if he is not receiving a response by the date promised.
The booklet also tells me that:
'TAS is independent within the IRS. The law requires each TAS office to secure and maintain means of communication independent of other IRS offices … We have the discretion to not disclose to the IRS any information you give us, or even inform the IRS that you've contacted us. In general, however, to provide you with assistance or relief, TAS will likely have to disclose the information with an IRS employee or employees.'
The TAS also has an Office of Systematic Advocacy to address broad issues that impact groups of taxpayers. This works within the IRS to resolve issues involving procedures and policies. If a problem requires a legislative solution the TAS can recommend a change in its annual report to Congress. Taxpayers and tax professionals can raise systematic issues with TAS over the Internet — which is likely to ensure that they get to know about a problem fairly quickly after it arises.
A response to aggression?
The TAS was set up by the 1996 Taxpayer Bill of Rights 2 Act. At that time, the IRS had become very aggressive in seeking to collect tax; regardless of the hardship and distress that the enforcement of tax liabilities with no concern for the taxpayer's overall financial position would cause. Congress decided that enough was enough, and TAS was one of a number of measures introduced to curb the powers of the IRS.
There seems to be a general feeling amongst tax professionals that HMRC have become increasingly aggressive over the last few years — although, I should make clear, nothing like as aggressive as the 1996 IRS. I suspect that those who deal with small businesses will feel, like me, that the recent HMRC statement on litigation policy is not being taken seriously within HMRC and that 'cost effectiveness' of enquiry work is a wholly alien concept to them. I suspect that the overall cost of the average HMRC employee is a minimum of £60 an hour. I imagine that most of us have seen lots of cases that at such a rate cannot possibly justify the costs of the enquiry into an issue. It would be great to have someone to turn to; to ask how the officer can be persuaded that the costs exceed the tax he thinks is at risk.
Of course, I am not suggesting that HMRC have become out of control as the IRS was in 1996. What I do believe though is that there is a role today for a UK Taxpayer Advocate; someone with a hand-holding role to steer taxpayers through a complex system that most do not understand and which is made more difficult to navigate by the fact that the current organisation of HMRC results in few HMRC line officers having either the time or the breadth of knowledge to explain it to taxpayers. We need someone to look at administrative procedures outside the confines of HMRC's specialists who seem constrained from embracing simplifications by thoughts of opportunities that it could create for avoidance or what changes it might need to HMRC systems, rather than starting from 'what would be easiest for taxpayers to cope with' and trying to make that work within the constraints that the need to combat avoidance inevitably require.
Conclusion
Although I know that many would disagree, I can see advantages in a UK Taxpayer Advocate being part of HMRC, as in the US. There are huge benefits in the Advocate knowing the system (the real system that is, not the theoretical one) and his or her staff knowing the HMRC employees at the coalface who have to work the system. What is important is not who pays the Taxpayer Advocate's salary, but that the role should be truly independent; with the Advocate neither part of, nor answerable to (other than in relation to human resources matters), the HMRC Board and being required to make a separate annual report to Parliament.
I suspect many readers will have better ideas than I as to what the precise role of a UK Taxpayer Advocate ought to be. The purpose of this article is not to seek to delineate such a role. It is to highlight what I believe to be the need for a UK Taxpayer Advocate — before, like the US, MPs' 'mailbags force Parliament to create the role — and hopefully to stir up a debate on what his role ought to be.
