“Make £30,000 and they will hound you until the cows come home; make £30,000,000 and you tell them how much you’d like to pay”
Most of us engaged in tax will at one stage have heard this phrase (or some variant) uttered in disdain. The perception that big companies and wealthy individuals get an easier ride from HMRC than the rest has, although around since time immemorial, become an issue of considerable force today. Public confidence in the administration of the tax system is undoubtedly at an acutely low ebb, as I’ve written about elsewhere on this blog (see: here). Where such arises, as the courts have indicated, HMRC is justified in taking steps which would ordinarily be beyond the body’s powers, such as disclosing taxpayer information, in order to correct the perception.
Public confidence in the administration of the tax system is one of the most important issues that any government will face. Most people’s relationship with the rule of law is that they can avoid engagement with authorities by following the rules. In other words, if you don’t commit a crime, you generally avoid being hassled by the police.
Tax is a unique case wherein such a privilege does not exist, wherein merely following the rules necessarily requires engagement with the authorities. So there is a positive duty in relation to tax law which is distinct from the prevailing interaction on the part of citizens with the rule of law which, on the contrary, merely requires negative action. This is why public confidence is an integral part of tax collection: people must take positive steps to comply with the law and largely do so because there is a sense that one’s neighbour is doing likewise. If there is a sense of a tiered system, whereby one’s neighbour in a horizontally similar position gets favourable treatment from the revenue collecting body, one might be less inclined to comply fully with the law.
To this end, Labour’s proposal for a review into HMRC’s management of investigations, prioritization of resources and leadership on avoidance/evasion appeared to be a sensible alternative to persisting with a drip feed of revelations about HMRC’s conduct which appear to further undermine public confidence in the system (and as I’ve indicated allow for departures from the traditional understanding of the right to privacy and the duty of confidence). Twitter has picked this issue up again today, with Jolyon Maugham posting an article from Bill Dodwell of Deloitte on the issue. It remains a sensible proposal, perhaps particularly so given that HMRC is now a decade old.
It will be important however that, if this proposal is taken up, there is a realistic mandate for the review. This should be a review of the process of decision-making rather than the substance of decisions made. It should look acutely at measures that can be made to increase public confidence. It should look at increasing transparency. Most importantly, the review should be used as an opportunity for HMRC to identify the biggest issues it faces in seeking to enforce the law and for HMRC to make its case as to why it should be trusted as the normatively best body to perform the fundamental duties of tax collection.