Tax effort stunted by job cuts, say MPs

Margaret Hodge: Job cuts 'slowed' tax recovery

Impressive efforts have been made by the UK tax authority to collect outstanding tax but more could have been done without job cuts, MPs say.

An extra £4.32bn was brought in during the last five years - a return 11 times greater than the investment in a new HM Revenue and Customs (HMRC) programme.

But a Public Accounts Committee report said another £1.1bn could have been collected without job losses at HMRC.

A union said that tax collection was "undermined" by job cuts.

"The case for investment in our public services could not be starker or more obvious than it is in HMRC, yet the government is actually planning to cut 10,000 more jobs from the department in the coming years," said Mark Serwotka, general secretary of the Public and Commercial Services union.

Some 3,300 jobs were cut during the five-year programme. There are 26,000 employed by HMRC on compliance and enforcement work.

A further £917m is being put into the tax collection programme until 2014-15.

'Shock'

The committee said that key lessons could be learned from previous tax collection projects to make the most of this investment.

The MPs also said they were shocked that HMRC appeared to authorise tax avoidance by senior public sector employees.

"It is incredible that the department could under any circumstances advise that this was acceptable behaviour for a public servant," said Margaret Hodge, who chairs the committee.

The committee said it had been inconsistent in deciding on the appropriateness of allowing arrangements such as using a managed service company (MSC) to avoid tax.

However, a HMRC spokesman said: "We are very clear that the use of MSCs are only for the purposes of tax avoidance and are always unacceptable which is why Parliament brought in legislation to prevent this tax avoidance."

On Wednesday, Chief Secretary to the Treasury Danny Alexander announced new "tighter" rules for departments to clamp down on "off payroll" contracts.

More than 2,400 public-sector workers may have avoided paying the full rate of income tax, Mr Alexander revealed.

A review of the tax arrangements of senior civil servants was carried out after it was revealed one was paid £182,000 without deductions for tax or National Insurance.

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