Your investigation into the level and nature of tax avoidance highlights the scale of the task that HMRC is up against. As you identify, the powerful and wealthy can afford to hire armies of well qualified advisors to avoid tax. That will never change. But our members are dedicated professionals who deliver massively for the Government and British public and but for their efforts the pain of deficit reduction would be even greater.
ARC members play a major part in HMRC’s compliance efforts. Our interventions and investigations combat a range of attempts to evade, avoid and criminally attack the tax system, ranging from the straightforward working cash in hand to extremely sophisticated avoidance. In 2010/11 that compliance activity brought in an additional £13.9 billion to the exchequer.
ARC members continue to deliver against a backdrop of HMRC resource cuts over many years and insufficient re-investment. From its formation in 2005 to the end of the current Spending Review in 2015, HMRC will have suffered 10 successive years of staff cuts, with staff levels falling from close to 100,000 to around 55,000. That’s why ARC has been consistently arguing that without adequate investment HMRC will be forced to make compromises and will thus bring in less tax revenue than otherwise it could have.
ARC/FDA is not a Union that just says ‘No change’. ARC accepts that HMRC has to be constantly reviewing how it can improve its own efficiency and works with HMRC in that endeavour. Our argument is that resources are reducing overall and that the savings that have been made over a number of years have not been adequately re-invested.
Even with the £917m ‘reinvestment’ pledged by Danny Alexander, HMRC will be cut by 15% over the next four years, whilst at the same time being expected to deliver savings of over £1bn by 2014-15. Furthermore that £917m reinvestment does not go nearly far enough. As we told the Government in our budget submission, a relatively modest investment of £260m over the next four years in key compliance areas, notably corporate tax avoidance, could recoup an extra £6bn in currently lost tax – an amount comparable to the total spending cuts announced by George Osborne in May 2010′s Emergency Budget.
ARC members maintain their professionalism and remain committed to closing the tax gap and tackling those who are determined to avoid and evade paying their fair share. But in the face of continued Government attacks on Civil Service terms and conditions how much longer will that continue? Four years of pay restraint, with a pay freeze followed by pay cap, means that by 2014 ARC members will be at least 16% worse off. Add in the detrimental changes to our pensions, for so long the anchor of staff retention, and the failure of the Government to address the issues of pay comparability and total reward, and it is all too easy to see a time bomb slowly ticking away. One that, when it goes off, could lead to a haemorrhage of dedicated and skilled professionals delivering a fatal blow to HMRC’s efforts to assist deficit reduction.
ARC members have a crucial role to play in getting the country out of the economic mess it’s in. Because each ARC member – whatever their professional role – be they tax inspectors, accountants, policy makers, solicitors, or administrators – is also a builder. The work we do builds schools, hospitals, libraries, playgrounds. The work we do, the money we bring into the exchequer (and senior professionals at ARC grades bring in 30 times their cost) pays for the social fabric of the country. The work we do is vital to not just defeating the deficit, but also – by providing cash to invest in public services and infrastructure – it encourages much needed growth, and that is why we will continue to argue that HMRC needs more resource, not less.
Gareth Hills, ARC President