Judge And Jury

By Global Tax Weekly

One does have a modicum of sympathy for Her Majesty’s Revenue and Customs, albeit a tiny one. Regularly lambasted by Parliament’s Public Accounts Committee (PAC) – led by Labour MP Margaret Hodge, who has emerged as Britain’s answer to Senator Carl Levin in America – and the mainstream media for being soft on corporate tax avoidance and cosying up to large multinationals in a series of so-called “sweetheart” tax rulings, HMRC is also castigated by the same set of critics for an increasingly heavy-handed approach in its numerous tax compliance campaigns. Damned if you do and damned if you don’t, you could say. On the first point, the criticism of the department has been a tad harsh. HMRC can only uphold the laws which are set by parliament in the first place, and a study of five sweetheart deals by the public spending watchdog the National Audit Office (NAO) in 2012 found that they actually were pretty good value for money for the taxpayer. Although the NAO expressed concern about the transparency of these private tax rulings, it concluded that the revenue derived from them was “reasonable” in four cases and “better than reasonable” in the remaining one. More worrying perhaps was that the NAO said there was no clear answer as to what represented the “right” tax liability for these five taxpayers in the first place. So if this is the case, should HMRC be handed the power to take money straight from people’s bank accounts or insist that those who have used a tax avoidance scheme pay disputed tax upfront before the case has been decided, apparently with no appeal mechanism? It’s almost like serving a prison sentence before the jury has decided whether you are guilty of the crime or not. The difference is I suppose that at least you will get your money back if HMRC are proved wrong. Time on the other hand is non-refundable. Statistics show, however, that the department, with a much larger pot of money for lawyers than your average taxpayer or small business, has a success rate of about 80 percent in tax litigation. So on the second point, HMRC has been rightly grilled for proposed new powers that could see it act as prosecutor, judge and jury and possibly executioner of many an SME. As we keep pointing out in this column, tax evasion shouldn’t be condoned; but neither should the vesting of such sweeping powers in an organ of state, and a pretty unaccountable one at that. Magna Carta? What’s that?

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