Welcome

Featured

Welcome to the Association of Revenue and Customs (ARC), the union which represents senior staff in HMRC including tax inspectors, accountants, lawyers, managers and other leading professionals.  It is also a section of the FDA, the trade union and professional body representing 18,000 of the UK’s senior civil and public servants.

International Women’s Day and the gender pay gap

Aside

On International Women’s Day, ARC asks the Government to address the increasing gender pay gap.

7 March 2014
(For immediate release) 

ARC is not surprised that recent research suggests senior female civil servants are paid an average of 5% less than men at the same grade, while the government’s own evidence to the SSRB suggested that this was even greater at 5.4%. ARC President Gareth Hills said:  

 

“In HMRC, women in senior grades can be paid up to 8% less than their male counterparts for the same work. In addition it is significantly more likely that men’s salaries are in the top quartile of the pay range and much less likely to be in the bottom quartile”.

 

“The problem is exacerbated by HMRC’s decision to withdraw arrangements where employees advanced through the pay scales. This in turn is aggravated by successive years of pay freezes – started by the last Government and perpetuated by this one. What we see is that long term pay policy in HMRC has had a disproportionately negative impact on women, leaving them paid significantly less than men, often by thousands of pounds”.

 

“The pay system in HMRC and across the civil service is distorted and dysfunctional. Where that results in challengeable equal pay issues in the workplace ARC and the FDA pursue cases through the courts. The union continues to press this Government – and the next – to hold a full review of civil service pay.”

 

Notes for editors

 

1.The FDA is the trade union for the UK’s senior public servants and professionals. FDA membership includes more than 19,000 senior civil servants, government policy advisors, diplomats, tax professionals, economists, solicitors, prosecutors and other professionals work across government and the NHS.

 

2. Members in HMRC are represented by the Association of Revenue and Customs (ARC), a section of the FDA.  

 

3. The FDA (formerly the First Division Association) should be referred to simply as “The FDA” and can be described as “the senior public servants’ union”.  

 

4. For further information contact:

          Gareth Hills, ARC President, tel: 020 7401 5555 or 07870 592356 .

Aside

ARC members to strike over imposed quotas and new terms and conditions

5 February 2014 
(for immediate release)
 
 
The Association of Revenue and Customs (ARC) has informed HMRC that members will be taking industrial action on 14 February 2014. 

ARC, the union representing senior managers and professionals in HMRC, recently balloted members on taking action over a new performance management system demanding fixed quotas – meaning 10% of staff fall in the bottom rating regardless of their performance – and new terms and conditions resulting in those who are promoted receiving a poorer deal. 

The ballot received turnout of 48%, with nearly 60% voting for strike action and 78% voting for action short of strike such as work to rule. 

ARC President Gareth Hills said: 

“ARC members have been asked to strike not for money, but in pursuit of some basic principles: reducing bureaucracy so we can do our jobs, a fair performance appraisal, rewarding, not penalising, promotions; and a fair deal for professionals. 

“Our members are not faceless bureaucrats, but real people striving every day to serve the Government and the public. The work they do builds schools, hospitals, libraries and playgrounds. It’s work that funds the social fabric of the UK and delivers for the nation. They deserve a fair performance system, one which allows them to do their job free from the tangle of bureaucracy.” 

Notes for editors 
1. The Association of Revenue and Customs (ARC) is a union representing senior staff in HM Revenue and Customs, including tax inspectors, accountants, lawyers, managers and other leading professionals. ARC represents members in HMRC at grade 7 and above, and also trainees in grade 7 entry schemes. It is also a section of the FDA. 

2. The FDA is the trade union and professional body representing 19,000 of the UK’s senior civil and public servants. Our members include policy advisors, senior managers, tax inspectors, economists, statisticians, accountants, special advisers, government lawyers, diplomats, crown prosecutors and NHS managers. 

3. The FDA (formerly the First Division Association) should be referred to simply as “The FDA” and can be described as “the senior public servants’ union”. 

4. For further information contact: 
• Gareth Hills, ARC President, tel: 020 7401 5555 or 07870 592356. 
• Kay Hender, Communications Officer, tel: 020 7401 5589 or 07980 700747. 

ARC President writes in Taxation magazine

 

 

Taxation magazine has published an article written by ARC President – and FDA Vice President – Gareth Hills, on the recent Parliamentary ARC event ‘Delivering for the Nation: Tax myths, challenges and opportunities’.

Hills’ piece is one of four from tax professionals responding to the recent BBC Panorama report on avoidance.

As the article is only available to registered users of the Taxationwebsite, the piece written by Hills is reproduced below:

‘Wasted opportunity

The Panorama programme was a wasted opportunity, writes Gareth Hills.

 

Apparently, Panorama attracts an average audience of 2.5m to 3m and it could have been a great chance  to start some serious educational and reporting work on complex tax issues.

Instead, the programme resorted to sensationalism, for example by conflating and confusing the use of legitimate reliefs with the statutory maternity pay avoidance that David Heaton was marketing. It seemed to give the mistaken impression that HMRC had recruited and appointed David Heaton to an HMRC committee.

While the programme did address some serious issues, such as the patent box, it failed to give the context. Nothing was said about the pros and cons of adopting measures like the patent box, and its possible international impact; nor did the programme suggest there were other reliefs available for small businesses, for example research and development credits.

Contrast Panorama’s approach with that of the Association of Revenue and Customs (ARC), a union representing staff at HMRC.

 

Last week, it hosted an invitation-only Westminster event to increase understanding on reducing the tax gap, especially tackling high-end avoidance.

Brief presentations were made by David Gauke MP, Catherine McKinnell MP, shadow exchequer secretary, Stephen Williams MP, chairman of the Liberal Democrats back bench Treasury Committee and Richard Miller, chief executive, ActionAid UK, who spoke about the implications of tax avoidance for developing countries.

The event was chaired by Vanessa Houlder, tax correspondent at the Financial Times.

An intellectually stimulating debate, it was just the start of work to debunk tax myths and increase public awareness on tax, with a consensus emerging that closing the tax gap is imperative in times of austerity.

While others will continue to posture and sensationalise, ARC will roll up its sleeves and carry on working with professional bodies and non-governmental organisations to show why tax matters and that by investing in key personnel in HMRC, the government would be guaranteed a significant return.

This would allow it to reduce the deficit, avoid further austerity measures or fund economic recovery and growth.’

Read the full article online:

One-sided affair
Taxation magazine 

Closing the Tax Gap – Delivering for the Nation

Debunking myths, identifying challenges and maximising opportunities

In brief

 

  • Closing the tax gap is an imperative in a time of      austerity and when all are meant to be in it together

 

  • Sustained and additional investment in HMRC is part      of the solution to shrinking the Tax Gap

 

  • ARC has shown that an investment of £312m invested in key personnel would deliver £8bn for nation. Surely the most compelling invest-to-save argument ever.

 

Introduction

 

ARC welcomes you to this meeting on Tax myths, challenges and opportunities. We’re a small trade union that represents the more senior members of HMRC. Our members deal with the whole range of tax affairs, from large corporates, through trusts and affluent individuals, legal advice, policy maintenance, and more.

 

Tax, tax policy and tax administration have recently generated a high level of public, media and Parliamentary attention. But we have become increasingly concerned at the lack of public awareness of many of the issues, indeed even of some of the basics[1], such as conflating turnover with taxable profits, or what is a Tax Gap.

 

The meeting has been organised because we strongly believe in the need to increase understanding and allow a focus on some key issues, such as policy choices[2].  We also believe by investing in HMRC to help reduce the Tax Gap the country has the opportunity to increase its tax revenues (without increasing tax rates) and reduce the Deficit. In some fundamental areas, like international taxation or for digital services, the current rules and policies no longer work and need to be modernised.

 

Tax Gap

 

Every economy has a tax gap. But there are problems in defining and measuring it.  HMRC describes the Tax Gap as the shortfall resulting from fraud, error, non-payment and artificial avoidance schemes, and refers to the ‘spirit of the law’[3].  There is, however, some confusion between the official Tax Gap – estimated by HMRC at £32 billion – and other sums of money avoided through technically legal means.

 

There are many opinions, across the world, on the best way in which to provide robust estimates on the scale of the tax gap. Some doubt its value. Apart from figures produced by individual tax authorities, some come from academic studies by economists, some from campaigning groups and some from official bodies such as the OECD. None ever seem to agree, some disagree very substantially[4]. ARC’s view is whether the figure is £32bn or £120bn, it is big enough to invest more to reduce it.

 

Does a Tax Gap matter?

 

There are a number of economic and policy reasons to care about non-compliance. It reduces the planned tax yield, potentially harming public services, and redistributes the tax burden on an ad hoc basis. Since not all taxpayers avoid or evade tax, it is both unfair and can undermine incentives that the Government intends to provide through the tax system.

 

It can waste public and private resources, through capacity devoted to devising and, in Government, countering, avoidance/evasion schemes rather than creating wealth. Fair competition is harmed by the distortions created via sophisticated legal and accounting techniques, making use of mismatches in taxing provisions across countries. Similarly, corporations that operate only in domestic markets, including family-owned businesses or new innovative companies, have difficulty competing with international businesses that have the ability to shift their profits across borders to avoid or reduce tax.

 

The UK position

 

The UK is not alone in having a Tax Gap. It can be hard to measure reliably across different countries but estimates put the UK near the bottom of the range. HMRC estimates that nearly half the gap is down to fraud, evasion and criminal attacks. £1.1bn is put down to avoidance by businesses managed by the Large Business Service, and £1.2bn for large and complex businesses. There are also international dimensions to the Tax Gap in how it impacts on developing economies and where solutions for the G8 or G20 may even decrease tax revenues in continents such as Africa[5].

 

According to the last HMRC figures the Tax Gap has fluctuated, but not greatly. These figures are net of HMRC compliance activity, worth £13.9bn in 2010/11, £16.6bn in 2011/12 and £20.7bn in 2012/13.

 

                       

 

 

Tackling the Gap

 

HMRC can tackle some aspects of the Gap by investing in better IT (to allow more effective risk assessment), in more clerical support for compliance staff, by employing more people to actively review and challenge were necessary . ARC members bring in yields far higher than their costs and we believe even a modest additional investment would bring in very substantial returns – £312mn to raise £8bn[6].

 

Reducing the Tax Gap, especially tackling high end avoidance, can be a complex and often time consuming process. Commentators agree that defining avoidance is not easy, with some arguing that transactions are either legal or not. Others have strongly criticised HMRC’s performance[7].

 

The House of Lords recent report on tackling avoidance[8] quoted from a study by the Oxford Business School. This suggested three types of avoidance: ineffective avoidance, effective avoidance, and using legislation or the international tax system to one’s advantage[9]

 

ARC believes that better staffing and better support can deal with the first two of these. But to tackle the third requires legislative changes and political will. Public demands will play a role here, as people realise the degree of under-taxation that current rules allow and even encourage. We are pleased to see that the OECD and its members have supported a review and Action Plan that addresses these issues of base erosion and profits shifting[10]. Changes to the international tax system are realistically only possible via international agreements and the UK government – and legislators – will have to work with their counterparts in Europe and across the world.

 

Conclusion

 

Today we are starting the work of debunking the myths around what are very complex taxation issues, not least how to reduce the tax gap.  Despite the Government’s austerity programme the UK budget deficit is still estimated to be over £100bn. And at the same time HMRC’s latest estimate of the UK tax gap is £32 billion.

 

HMRC is on course to deliver the additional £7 billion each year to 2015 as part of the £917 million reinvestment programme. ARC believes that in achieving that, HMRC will have demonstrated what we have been saying consistently over recent years – that by investing in key personnel in HMRC, its main revenue raising department, the Government will be guaranteed a significant return; one it could use to draw down the deficit, to avoid further austerity measures, or to fund economic recovery and growth.

 

 

 

Further information can be found in the following publications

 

Action Aid paper on Tax Responsibility for Investors (http://www.actionaid.org.uk/news-and-views/actionaid-releases-new-tax-responsibility-guide-for-ftse-investors)

 

ARC, 2013 Budget Submission, http://www.fda.org.uk/Media/Tax-gap-is-closing-but-further-8-billion-could-be-recouped-by-HMRC-providing-an-alternative-to-cuts-or-tax-increases-says-ARC-Budget-submission.aspx

 

R Brooks, The Great Tax Robbery, 2013.

CBI Papers on Tax and Business http://www.cbi.org.uk/media/2145560/making_the_case_-_july_2013.pdf

 

HMRC Factsheets:

(http://www.hmrc.gov.uk/about/briefings/profits-multinationals.pdf)

 

House of Commons debate, 5 February 2013, HMRC capacity and resources, http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130205/halltext/130205h0001.htm

 

House of Lords, Report on Tackling Corporate Tax Avoidance in a Global Economy, The 58pp executive summary (http://www.publications.parliament.uk/pa/ld201314/ldselect/ldeconaf/48/48.pdf)

 

Institute of Fiscal Studies, Green Budget, February 2013, Chapter 10, Corporate tax, revenues and avoidance, http://www.ifs.org.uk/budgets/gb2013/gb2013.pdf

 

OECD Action Plan on Base Erosion and Profit Shifting (http://www.oecd.org/ctp/BEPSActionPlan.pdf)

 

Oxfam paper on Tax Havens (http://www.taxjustice.net/cms/upload/pdf/oxfam_paper_-_final_version__06_00.pdf)

 

Oxford business School Report for the NAO on Tax Avoidance http://www.sbs.ox.ac.uk/centres/tax/Documents/reports/TA_3_12_12.pdf

 

Parliamentary Accounts Committee:

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/870/870.pdf

 

Tax Research, http://www.taxresearch.org.uk/Documents/PCSTaxGap.pdf

 

Treasury Select Committee, 6 March 2012, Closing the Tax Gap: HMRC’s record at ensuring compliance, http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/1371/1371.pdf


[2] One very strong critic of UK tax administration believes “The central issue in British tax avoidance today is a political one”, R Brooks, The Great Tax Robbery, p22

[7] See the PAC reports in the reading list.

[10] OECD Action Plan on Base Erosion and Profit Shifting (http://www.oecd.org/ctp/BEPSActionPlan.pdf)

Evidence to House of   Lords Select Committee

Aside

Evidence to House of   Lords Select Committee on Economic Affairs:

Reforming Corporate   Taxation

INTRODUCTION 

 

The Association of Revenue and Customs (ARC) is   both an independent trade union and the HMRC section of the FDA, the trade   union for senior managers and professionals in public service. ARC represents   around 2,600 members in HMRC, at grade 7 and above, as well as trainees in   grade 7 entry schemes. Our members are senior officials, lawyers and tax professionals,   collectively taking responsibility for the collection of UK taxes, and   tackling corporate tax evasion and avoidance, at the highest and most complex   level.

 

ARC is pleased to take up the Committee’s request   to provide evidence on corporate tax. As the Committee suggests, we are   focussing on whether a new approach is needed to taxing corporations in a   global economy. Most of the suggested questions relate to areas where we   would not claim any particular expertise (e.g. Q1 and who bears the burden of   corporation tax) or are matters of policy where we, as a non-political union,   do not make any public comments.

 

EXECUTIVE   SUMMARY

 

The complex nature of cross border transactions,   along with the complicated structures of multinational groups, and the   current rules, makes ensuring the correct tax treatment of those transactions   among the most difficult work of HMRC’s professionals. As the union   representing those professionals ARC has views on a number of the questions   raised by the Committee.

 

On   question 7regards   reforming the basis of the international allocation of multinational profits   – ARC believes the current taxation system is extremely problematic and may   be driving aggressive tax planning in cross border transactions. However   there is little scope in unilateral action. It is work at the international   level that should provide a focus for concerted action. ARC therefore urge   the Prime Minister to use his Presidency of the G8 not only to drive forward   the debate regards tax evasion and avoidance but to mark a tipping point in   co-ordinated and strenuous policy reform and cross border co-operation to   increase the collection of corporation taxes owed.

 

On   question 11How   successful is the HMRC in dealing with large international business? –   ARC point out that HMRC is remarkably efficient in tackling non-compliance   and is pleased that the Government has recognised, both in word and in deed,   that further investment in front line compliance activity provides a return   on invest of more than 20 to 1. ARC’s fully costed Budget submission showed   that further investment of £312m into HMRC would deliver additional revenues   to UK plc of £8billion – see  http://www.fda.org.uk/nmsruntime/saveasdialog.aspx?lID=5551&sID=7617

Whilst the autumn statement gave HMRC some   additional expertise, that will be nowhere near enough to match that   available to corporates. There are just over 1,100 staff in the Large   Business Service dealing with the tax affairs of the UK’s largest 770   businesses. Further investment is needed to recruit specialists, improve   staff engagement, reduce pay disparities with the private sector and plan for   the demographic challenge given that 35% of staff are already aged over 50.

 

On   question 12Has the   use of aggressive tax avoidance schemes increased or decreased over the last   decade?our   members do not report any reduction in the scale of avoidance, either   notified or discovered. Meanwhile the DOTAS scheme has been of value, with   numerous changes to the law and successful enquiries although it should be   noted that recent figures show that this process only accounted for 46% of   all avoidance HMRC detected. ARC is not sure of the basis on which promoters   would be “named and shamed” however we welcome a public debate on this   proposal.

 

On question 13Is there a need for greater transparency   by multinational companies in declaring taxes paid in different countries?   – ARC believes that any additional transparency is welcome but we are not   convinced that it will be easy to achieve. We suggest it would be better to   focus on the root causes ie promote the wider use of automatic information   exchange and having sufficient trained staff (across all participating   countries) to review information and able to challenge when necessary.

 

RESPONSES   TO SPECIFIC QUESTIONS

 

Q7. Is there a need to reform the basis of the international allocation of multinational profits between countries? If so, should this be based on the existing conventions, as recently suggested by the OECD, or is there a need for more fundamental reform? What other feasible alternatives are there, consistent with international law?

 

  1. Like many others ARC firmly believes that the current corporate taxation system is extremely problematic and may actually be driving aggressive tax planning in cross-border transactions. The UK may be losing its ability to match tax revenues with the economic substance of trading and investment activity. New forms of technology, the capacity of businesses to incorporate in a choice of jurisdictions and the growing use of offshore intermediaries threatens to erode the UK corporate tax base.

 

  1. ARC doubts if there is any real scope for unilateral action in tackling tax avoidance via international companies. Along with other fiscal authorities, commentators have pointed out that the current rules are based on political and economic conditions nearly 100 years ago.

 

  1. International companies who operate within these rules are able to plan their incidence and rate of tax in advantageous ways, often in ways unavailable to domestic businesses. As the OECD summarises, the result is tax base erosion and profit shifting (BEPS)[1].

 

  1. However, alternatives to the current system will not be easy to introduce, especially given the number of international treaties and fiscs that exist[2] Furthermore, moving to any fundamentally new system is, in our view, not likely to guarantee any automatic increase in tax yields. Based on our members’ experience of the ingenuity of tax planners it may serve to offer new, or even unintended, opportunities for tax avoidance.

 

  1. We consider that the work already underway in the OECD provides a single point of focus for a collective approach that builds on the existing infrastructure of treaties, exchanges of information, mutual assistance, double taxation, etc. In mid-April the OECD reported to the G20 Finance Ministers on the progress of its work on the BEPS project, with the aim of producing an Action Plan by the summer.

 

  1. As well as a Tax Gap, there is a policy gap. Bringing international tax rules into the 21st century will not be easy but we support this work. Issues such as limits to interest deductions, worldwide debt caps, excess leverage, the treatment of intangibles, potential re-badging of activities, and e-commerce are all in scope.

 

  1. But ARC also believes that the UK can do more to assist in this work. Already the UK chairs a committee set up by the OECD looking at “transfer pricing”[3].The Chancellor and Prime Minister have repeated their commitments to tackling “aggressive” tax avoidance. After the February meeting of the G20 the Chancellor declared there was scope to go further. He said that this year, the UK hosts the meeting of G8 leaders and that the UK was determined to use the Presidency to drive a serious debate on tax evasion and tax avoidance.[4]

 

  1. ARC would urge the Prime Minister to press for more automatic data exchange, increasing the UK’s technical support in areas such as the OECD technical committees, more practical tax support and building capacity in developing nations[5]. But at the end of the day it will require cross-border co-operation to prevent the use of aggressive international tax planning.

Q11. How successful is the HMRC in dealing with large international business?

 

  1. By any standards HMRC is remarkably efficient in tackling non-compliance across all areas of risk. ARC members are engaged in tackling the biggest tax risks, whether as tax professionals, policy makers, lawyers, accountants or managers.

Their work brings in the lion’s share of the nearly £13bn tax gap closure delivered by HMRC in 10/11; £16.6bn in 11/12. At the top end of this work the yield can exceed 180 times the costs of the staff employed that recoup these sums.

 

10. As part of CSR 2010 ARC welcomed the decision to re-invest £917mn of the cuts HMRC will make into front line compliance activity. David Gauke (Exchequer Secretary to the Treasury) recently confirmed this investment was working: “HMRC

results have shown that it can deliver the additional yield. As the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) noted, in 2011-12, it delivered £16.6 billion against its targeted increased yield of £15 billion, and is on course to deliver an additional £17 billion this year.”[6] In 2012/13 this was £21 billion.

 

11. Indeed, Ministers have already accepted the logic of this argument and made further reinvestments in HMRC. We also welcomed the decision to spare HMRC further cuts in the 2012 Autumn Statement[7].  But the Government should reconsider the scale of the proposed reductions in HMRC staffing, retain experienced staff, and increase recruitment of both trainees and skilled tax professionals. Tackling the difficult work on international taxation relies on a properly trained, skilled, developed and properly rewarded, cadre of senior professional staff.

 

12. ARC members work incredibly hard and are seen as world class[8], but they cannot deal with everything[9]. ARC’s best estimate is that Transfer Pricing expert resource available in HMRC is barely four times that of a single multinational corporate – and HMRC deals with hundreds of such multi-nationals. In addition, when dealing with HMRC enquires these companies can, and do, boost their resources with additional specialist skills from the legal profession and the Big 4 accountancy firms.

 

13. HMRC’s ability to bring in additional resources is severely constrained by lack of resources. Mike Truman, in Taxation, recently noted that “Treating the department just like any other when it comes to staffing ignores the fact that these are the people who bring in the money to pay for everything else.”[10] 

 

14. Whilst the autumn statement gave HMRC some additional expertise, that will be nowhere near enough to match that available to corporates. There are just over 1,100 staff in the Large Business Service dealing with the tax affairs of the UK’s largest 770 businesses. Our members report that the relationships developed with these businesses (e.g. via dedicated Customer Relationship Managers) help promote voluntary tax compliance. The numbers dealing with the 11,000 large businesses are proportionately even less, and much less than one tax professional per large corporate.  We consider that a significant increase in HMRC resources dedicated to the tax affairs of large corporate would generate yield of around 50 times salary costs through tax gap closure and improved voluntary compliance.

 

15. There are signs that HMRC is finding it harder to recruit specialists and staff engagement is still low.  Regrettably, HMRC is still near the bottom of the Civil Service Engagement table. And low engagement and morale is not just an issue for junior staff. A recent FDA survey of SCS members showed 24% would like to leave their jobs as soon as possible. Even using the Government’s own figures 20% would like to leave within 12 months – 5% as soon as possible and 15% within 12 months. HMRC and the unions are working to improve on that, but it will take some time to address the legacy of trust and engagement issues.

 

16. Accountancy firms and large corporates seek out senior expertise. As pay, pensions and conditions continue to be eroded in HMRC there is a real fear that we will lose this precious resource over the next few years. Quite apart from the recent pay freeze and current 1% pay cap, the Hay Group reported last December to Cabinet Office on pay comparisons, as part of the review of Market Facing pay. This shows serious disparities at the level of ARC grades. A qualified international specialist who left to work in the private sector could expect an initial remuneration package of double that paid by HMRC.

 

17. ARC urges the Government to act now to address these pay disparities and with-draw changes to terms and conditions that are currently being proposed. If allowed to continue we believe HMRC risks a rerun of the damaging loss of resources seen in the 1980s when the Inland Revenue was losing 10% of its trained and experienced senior tax professionals each year. This exodus of talent was a direct consequence of huge disparities between the remuneration packages on offer from the ‘Big 4’ accountancy firms compared with those on offer in Inland Revenue. 

 

18. The current disparities between public and private sector remuneration are at least as large as those that existed in the 1980s.  The haemorrhaging of talent was only stemmed when significant pay increases were agreed for senior tax professionals working in Inland Revenue.  But severe damage had already been done and these losses are still being felt today.

19. HMRC has recognised the dangers and is engaged in very substantial recruitment at graduate level. But things will get worse before they get better. Given current systemic shortages and the demographic profile, where 13% of HMRC staff are below 30 and 35% above 50[11], a repeat of the 1980s exodus would have a disastrous impact on HMRC’s ability to tackle tax avoidance.  History sends us a warning.

 

 

Q12. Has the use of aggressive tax avoidance schemes increased or decreased over the last decade? Why? How successful has the DOTAS scheme been? Should promoters of tax avoidance scheme be named and shamed?

 

20. Our members do not report any reduction in the scale of avoidance, either notified or discovered. Nor have they noticed any reduction in the number of tax professionals engaged in tax advice and planning [12]. Instead, they report a shift away from “off the shelf” products to more personalised and bespoke schemes, such as ones that make use of techniques associated with transfer pricing.

 

21. This is substantiated by last November’s Report from the NAO. They noted that “Over 100 new avoidance schemes have been disclosed under DOTAS in each of the last four years, many of them involving variations on themes as promoters respond to changes in tax law. There is no evidence that the use of such schemes is reducing.”[13]

 

22. The DOTAS scheme has been of value, with numerous changes to the law and successful enquiries. But recent figures show that this process only accounted for 46% of all avoidance HMRC detected, even so HMRC calculates that the DOTAS disclosures have yielded c£12.5bn.[14] ARC members will be involved in the risk assessing and review work that helps detect the balance of the cases. Any increase in the numbers of HMRC tax professionals will produce very significant yields.

 

23. ARC is not sure of the basis on which promoters would be “named and shamed”. We do not think this is the same as managing deliberate defaulters as avoidance is not defined in the same terms as evasion of tax. Clearly, if there are legal challenges on any specific avoidance case that is taken before Tribunal or Courts then those hearings are a matter of public record. 

 

24. However, we are very conscious of the need for taxpayer confidentiality in such areas and do not see how this can be maintained if naming and shaming were introduced. But we would welcome a public debate on this proposal and any associated measures needed to give effect to it. We are aware of some evidence that suggests the current consensus amongst politicians and the media of deploring and denouncing aggressive tax avoidance is showing results in shifting taxpayers’ behaviour due to fears of reputational damage.

 

 

Q13. Is there a need for greater transparency by multinational companies in declaring taxes paid in different countries?

 

25. ARC believes that any additional transparency is welcome, such as more public information on key business data like the group structure. But we are not convinced that it will be easy to achieve (e.g. agreeing a definition that would apply across all countries and in identical transactions) or easy to monitor (how would any lack of transparency be visible). Indeed, the veil of alleged “transparency” could be used to conceal avoidance. Furthermore, the idea may founder on the practical issues that would have to be considered, such as the way in which tax authorities will be able to monitor adherence to any rules on transparency, the consequences of failures, in which country any lack of adherence occurred, possible sanctions and consequent appeals.

 

26. We suggest it would be better to focus on the root causes (as in Q7), promote the wider use of automatic information exchange, having sufficient trained staff (across all participating countries) to review information and able to challenge when necessary. Tax authorities still need tax professionals to do the detailed work needed to establish the facts, apply the law and challenge avoidance.


[2] “a radical new set of rules would create winners and losers, both of which must agree to any new deal. Countries want to protect their own interests. Tax is at the heart of national sovereignty – and is thus fiercely defended.” Vanessa Houlder, Financial Times, 3 May 2013.

 

[5] For example, HMRC reports a 40% increase in tax revenue collection in Ethiopia since 2010 when it began technical assistance, http://www.guardian.co.uk/politics/2013/may/07/hmrc-help-ethiopia-tanzania-taxes

[7]“It was decided that we would exempt HMRC from cuts imposed on other Departments in the 2012 autumn statement”. http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130205/halltext/130205h0001.htm#13020531000001, p20

 

[8] See, for example, comments from John Dixon, Head of Tax Policy, Ernst and Young. “I think, with respect, you are underestimating the skills and quality of HMRC representatives”. Q145, http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/uc870-i/uc87001.htm

 

[9] “While I completely understand the point about charging for them, one of the difficulties that that does not deal with is the actual use of experienced HMRC officers who may be diverted from enforcing the tax law to the more complex question of giving a clearance. They have not got so many free high-quality inspectors.” Bill Dodwell, Head of Tax Policy, Deloittes, evidence, 21 January 2013, to the House of Lords Sub-Committee on the Finance Bill, 2013, p86.

 

[11] Over half HMRC’s staff are over 45 and 18% aged over 55, with around 30% of Grade 6 and above over 55, http://www.hmrc.gov.uk/about/eqact2010-workforce.pdf

 

[12] See the recent report from the Public Accounts Committee on the scale of the Big 4; 8,897 employees and a turnover of £1.853bn. Tax avoidance: the role of large accountancy firms, 15 April 2013,

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/870/870.pdf

 

[13] Tax avoidance: tackling marketed avoidance schemes, 21 November 2012, conclusion 7

http://www.nao.org.uk/wp-content/uploads/2012/11/1213730es.pdf. See also The Disclosure of Tax Avoidance Schemes Regime, Oxford University Centre for Business Taxation, 3 December 2012, http://www.sbs.ox.ac.uk/centres/tax/Documents/reports/DOTAS_3_12_12.pdf

 

At the centenary of Suffragette Emily Davison’s death,

Aside

At the centenary of Suffragette Emily Davison’s death, pay inequality still exists for female workers says ARC

3 June 2013 
(For immediate release) 
  
One hundred years on from the incident leading to the death of Suffragette Emily Davison, there remain significantly lower pay differentials for women in the workplace says the Association of Revenue and Customs (ARC), the union representing senior staff in HM Revenue and Customs (HMRC). 

In response to the Government’s recent announcement – by the Minister for Women and Equalities, Jo Swinson – that it is carrying out a further consultation around equal pay audits, ARC President Gareth Hills said: 

“In HMRC, women in senior grades can be paid up to 8% less than their male counterparts for the same work, dependent on grade, location and working pattern. In addition it is significantly more likely that men’s salaries are in the top quartile of the pay range and much less likely to be in the bottom quartile. 

“The problem persists because HMRC’s decision to withdraw previous pay progression arrangements where employees advanced through the pay scales has been exacerbated, by successive years of pay freezes and the continuing 1% pay cap. That has had a disproportionate impact on women, leaving them disproportionately underpaid, often by thousands of pounds. 

“It’s both infuriating and disheartening; on the one hand HMRC has made some welcome progress in seeking to improve representation of women at senior grades, but only in the past few weeks it has decided to impose reduced terms and conditions on staff when they are promoted.” 
 

Notes for editors
 
1. The FDA is the trade union for the UK’s senior public servants and professionals. FDA membership includes more than 19,000 senior civil servants, government policy advisors, diplomats, tax professionals, economists, solicitors, prosecutors and other professionals work across government and the NHS.
 
2.  Members in HMRC are represented by the Association of Revenue and Customs (ARC), a section of the FDA.  
 
3. The FDA (formerly the First Division Association) should be referred to simply as “The FDA” and can be described as “the senior public servants’ union”.  
 
4. For further information contact:

• Gareth Hills, ARC President, tel: 020 7401 5555 or 07870 592356 .