HMRC is certainly taking a hammering these days. Those in the twittersphere have questioned their modus operandi and the press has hounded the public authority for failing to prosecute more Swiss bank account holders. Both the Treasury Select Committee and Public Accounts Committee have likewise interrogated HMRC’s top officials. Public confidence in the administration of the tax system is undoubtedly at a dangerously low ebb.
Curious things happen when such a crisis of confidence arises. For instance, most commentators will have (no doubt with bemusement) witnessed moral aversion of Greg Wise and Emma Thompson to paying tax as justified on the basis of her opposition to the current operations of HMRC. A more pressing issue however is how deterioration in public confidence generally can impact upon the human rights of individual taxpayers.
For this, we need only look as far as the case of Ingenious Media and McKenna from 2013. David Hartnett, then Permanent Secretary of HMRC, engaged with two journalists from The Times on an ‘off the record’ basis. The substance of the conversation was of tax avoidance schemes which were taking advantage of the ‘Film Partnership’ legislative provisions. Over the course of the meeting, Hartnett referred specifically to the claimants, Ingenious Media and Patrick McKenna, as marketers of such avoidance schemes; expanded that ‘Film Schemes’ had deprived the public purse of circa £5bn and pronounced such schemes as ‘scams for scumbags’. These comments were later quoted, albeit with anonymity attached, in an article published by the journalists on the 21st June 2012. The claimants sought judicial review of the decision of Dave Hartnett to engage with the journalists on the basis that the discussion, inter alia, breached the duty of confidentiality enshrined in s.18 CRCA 2005. For Sales J in the High Court, the question was whether the decision of Hartnett was justified on the basis that the release of such information was necessary for the performance of HMRC’s functions. Hartnett believed that the dialogue was important at that particular point in time given the public perception of ‘cosiness’ with large taxpayers. Moreover, the journalists intimated that they would pass onto HMRC a large body of information which they had accumulated in relation to tax avoidance. Sales J agreed and issued a high level of deference to HMRC’s decision
In my view, the court’s role in assessing whether Mr Hartnett stayed within the bounds of the law is not to “second guess” his decisions taken in the twists and turns of a conversation in which the court did not participate, and against a background of policy and handling relations with the press with which the court is not deeply familiar and in relation to which Mr Hartnett and those advising him within HMRC are experts. It is not appropriate for the court to approach the matter as if it were the primary decision-maker [Para 40]
Sales J was convinced by many factors such that the disclosure by Hartnett was justified (para 44). For instance, it would serve to foster a relationship of co-operation with the press. To fail to facilitate this would compound perceptions of bias and jeopardise efficient tax-collection. The specific information which the journalists held in relation to tax avoidance also provided further justification.
Phillipa Whipple QC of One Crown Office Row has criticized this judgment in respect of the fact that Dave Hartnett gave specific details in relation to the Claimants. There is some force in this argument. Sales J’s judgment is correct in its assessment of the need for confidence in the tax system and a co-operative relationship with the Press. However, it does not follow that it was necessary for Hartnett to reveal the taxpayers names and indeed his willingness to provide such information is contrary to what appears to be the settled Revenue practice of simply refusing to comment upon individual cases (see for instance Privacy International).
What is clear form this case is that public confidence in the administration of the tax system can impact upon the duty of confidentiality which is owed by HMRC and upon the right to privacy of individuals. When HMRC is increasingly pressured into vindicating its operations, it is justified in turn in encroaching upon their duty of confidence and the human rights of taxpayers.
The case has been appealed to the Court of Appeal, where judgment has been reserved. One can only wonder whether the recent events and pressure upon HMRC will serve to further vindicate the original decision in the High Court.