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HMRC bosses will have to significantly raise morale and improve performance within the department if it is to hit the ‘stretching target’ of bringing in billions more pounds through investigations into tax dodging, MPs have warned.
In a report published today, the Commons Public Accounts Committee applauds the progress made by the Revenue in increasing yield while reducing costs through better focusing of its work: the taxman’s two directorates responsible for civil investigation work brought in £8.5 billion of revenue in 2009/10, almost 50% more than the total raised in the preceding three years.
But the paper, HM Revenue & Customs: Managing Civil Tax Investigations, goes on to advise that the department faces a ‘significant challenge’ over the next four years, as it follows next month's Business Implementation Plan by working to raise an extra £18 billion from tackling tax fraud, evasion and debt, while aiming to reduce costs.
In October’s government spending review, HMRC were instructed by the chancellor to trim their resources budget by an additional 15%, on top of the 10% cut in spending achieved during 2009/10.
For both ambitions to be achieved, senior department officials ‘will need to show strong leadership’ and ‘pay close attention to the morale of staff [members]’, says the Public Accounts Committee report, which notes that a quarter of civil investigations of fraud resulted in a penalty of less than 10% of the tax due – and in one in seven cases, no penalty was imposed at all.
The committee also recognises that Revenue caseworkers have become ‘disillusioned’ by the fact that only 20% of cases are adopted when referred to dedicated teams within the investigation directorates.
‘It is demoralising to frontline staff to have so many cases rejected,’ notes the document, adding that the proposed re-design of the referrals system should provide employees with improved tools, as should the new, tougher sanctions regime for taxpayers who make deliberate errors.
Public Accounts Committee chairperson Margaret Hodge MP welcomed HMRC’s recent achievements. ‘The department now has a much more stretching target,’ she said.
‘A crucial point is that the department has lacked detailed information on how much [money] different types of enforcement activity cost and what the returns are. It will need this information to meet the challenge of the new target.'
She added: ‘HMRC must improve their performance in key areas. Their targets for investigation directorates have not been demanding enough… Only a quarter of civil investigations of fraud cases were completed within the [standard] 18-month target. The level of penalties being imposed in cases of fraud has been too low, and the systems for tracking whether tax debts are being collected are poor.
‘Strong leadership will be needed to boost morale within the department from its current low ebb.’
