As the United Nations agrees to convene a global conference on ending tax havens and tax avoidance Labour published the first stage of its review of HMRC, writes Mike Davis
Reforming HMRC*, the Report of an independent panel led by Professor Prem Sikka, commissioned by Shadow Chancellor John McDonnell sets out the basis for a Labour Government (or any government serious about increasing Treasury revenue from the rich) to boost public revenues and end the scandal of companies like Vodaphone, Google and Facebook paying peanuts on multi-million pound earnings. The contents of the report form a submission to Labour’s policy making process; they do not constitute Labour Party policy nor should the inclusion of conclusions and recommendations be taken to signify Labour Party endorsement for them. However, the report makes a powerful case for a fundamental shift of policy on tax collection that Labour is likely to adopt. At the September launch chaired by Rebecca Long-Bailey, Shadow Treasury minister, she spoke about the allegations HMRC is too close to big business, is inadequately resourced, reveals a lack of accountability to parliamentary committees and has over recent years failed to provide an effective service.
Prem Sikka outlined the recommendations which include support and protection for whisteblowers, challenging sweetheart deals and making the accounts of public companies fully transparent. Jon Christiansen, who heads the Tax Justice Network, emphasised the importance of exposing tax havens, drawing on his experience of campaigning in the Channel Islands. McDonnell reported the tax gap from HMRC could be as low as £35 billion or as much as Richard Murphy reports at £120b. He said that the Danish government had paid £1 million for access to the Panama papers that had revealed industrial scale tax evasion and avoidance by multinationals. The Tories reduction of the Corporation tax bill to 20% had not produced investment, especially by the big corporations that were holding £560b in earned income. He pledged Labour would return to corporation tax levels of 2012. The opening summary explains ‘Her Majesty’s Revenue & Customs (HMRC) performs a vital task in collecting taxes, enforcing lax laws and delivering services to taxpayers. Against a background of reductions in resources, it has experienced considerable difficulties in meeting the service expectation of taxpayers and challenging organised tax avoidance.’ Having investigated the problems, including a loss of over 30% staffing, the report proposes a range of fundamental reforms including: 1. The formation of a Supervisory Board, consisting of stakeholders, to watch over HMRC Board to give it direction and enhance its public accountability.
The Board shall act as a bulwark against corporate capture and inertia and be accountable to parliamentary committees. 2. The Supervisory Board should support and protect tax whistleblowers. 3. Additional investment in HMRC resources and staffing. 4. HMRC needs local knowledge and must respond to citizens’ concerns. This is best achieved through a network of local offices and staff with local knowledge. 5. HMRC should have a well resourced internal investigation and prosecution unit. This would strengthen its in-house institutional knowledge base. 6. HMRC should offer competitive financial rewards to its staff. 7. Stronger parliamentary oversight. 8. The tax returns, related computations and documents of all large companies must be made publicly available. The public availability of corporate tax information will improve the quality of information available to parliamentary committees to scrutinise the effectiveness of HMRC in meeting its objectives. 9. Parliamentary committees should be empowered to examine any tax information, no matter how sensitive.
It would be up to the relevant parliamentary committee to decide whether scrutiny of any documents and practices should be conducted in private or closed meetings. 10. The backlog of tax cases creates uncertainties and anxieties. This is also unfair to taxpayers. The judicial capacity to hear cases should be expanded. 11. Various reports published by HMRC should contain information that enhances transparency and accountability. 12. Public pressure is a vital ingredient in transforming HMRC. It should not be diluted by the introduction of fees to challenge tax assessments. 13. HMRC needs effective tools to combat sham. We recommend a rewrite of the General Anti Abuse Rule (GAAR). HMRC should be guided by the Department of Justice and/or a panel of retired judges, rather than by corporate elites. The next phase of the HMRC review will be a PCS union staff survey and assessment of resources needed followed in the new year by a seminar to discuss the legislative basis for tax law. This work is of vital importance in providing Labour with a comprehensive toolkit to tackle a global problem. It should include Labour in European and UN wide cooperation to ensure the corporations have no escape routes from tax justice.