Legal accountability in the case of HMRC

The Public Accounts Committee, a body charged with responsibility on behalf of Parliament for holding HMRC to account, noted in 2011 that it had ‘serious concerns that large companies are treated more favourably by [HMRC] than other taxpayers’ (Public Accounts Committee, HM Revenue & Customs 2010–11 Accounts: tax disputes (HC 2010-12, 1531) 4.). The fact that HMRC changed its governance structure five years ago to address this problem appears to have had little impact, for in 2016 the Committee wrote similarly that the ‘public is highly sceptical about whether large businesses pay the corporation tax they should in the UK, and HMRC must address this’ (Public Accounts Committee, Corporate tax settlements (HC 2015-16, 788) 5). Put another way, the public is sceptical of HMRC’s ability to collect the correct amount of tax from large corporations. Professor Freedman has called for the creation of a sustainable, institutional solution to this issue (Judith Freedman, ‘UK institutions for tax governance: reviewing tax settlements’ [2016] 1 BTR 7, 12). The problem however goes deeper than simply ensuring multinationals are being properly subjected to the law by HMRC. The distrust of HMRC is merely a symptom of a deeper issue of accountability.

‘Quis custodiet ipsos custodies’ [who guards the guardians] is a question little explored in the literature in the case of HMRC. Who holds the body to account? Given that it is a non-ministerial governmental department, the traditional avenue of individual ministerial responsibility is eschewed. Parliamentary control is instead handed to select committees, in this case the Public Accounts Committee and the Treasury Select Committee. The National Audit Office in turn audits HMRC’s accounts and lays them for scrutiny before the Public Accounts Committee. Meanwhile the Adjudicator’s Office and the Parliamentary Ombudsman seek to ensure that individual taxpayers are treated fairly by HMRC. Each of these bodies is endowed with broad powers so that they can carry out their functions effectively. In combination, the bodies are adequately equipped to ensure the efficiency of HMRC operations and, to an extent, propriety in the treatment of taxpayers. It is highly questionable however whether they are not properly competent to hold HMRC to account with respect to the body’s wide-ranging functions.

A fundamental question then must be asked: are the mechanisms for ensuring that HMRC is properly carrying out its functions fit for purpose? If not, what alternative structure can be instituted to shore up the inadequacy? It would be blunt to say that transparency alone, whether of revenue operations or tax returns, could shore up problems of accountability. So too would it be to suggest that a supranational body such as the EU Commission could be a supervisor for the wide range of actions undertaken by revenue authorities. What is required is a comprehensive, holistic, dispassionate approach to these issues which takes account amongst other things of best practices in other countries. It would be wrong to acquiesce as we are already on to our second iteration of a Public Accounts Committee which stresses that something must be done.



About taxatlincolnox

Tax law academic. With this blog, I seek merely to contribute to the debate. All thoughts are mine, of course.
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