Does it make any sense to cut the HMRC budget?
(Live from the commentisfree reject bin!)
Money for schools, money for Olympic athletes, money for scientists, but a 5% budget for Her Majesty’s Revenue and Customs? Won’t somebody think of the tax inspectors, for the love of God, will nobody think of the tax inspectors?
The budget cut for HMRC is apparently meant to drive a big program of “red tape reduction” to lower the burden on business of all the Kafkaesque nightmare of VAT, National Insurance and tax forms. Which is a noble enough aim; they are bloody awful and something ought to be done. But it seems to me a really silly idea to claw back the saving to fund other parts of the budget, rather than allowing HMRC to spend the money on more enforcement personnel.
It’s one of the most solidly established facts about tax policy; the marginal revenue contribution of a fully qualified Inspector of Her Majesty’s Taxes is way, way higher than the cost. They’re some of the most productive assets that the government system has, only outperformed by a few really cleverly located speed cameras on the M11. Cutting the budget for the Revenue, means leaving money on the table for the Revenue.
It seems particularly short-sighted to be cutting the HMRC budget given that the budget also creates a big resource commitment for them from the new requirement for tax planners to disclose details of their new avoidance schemes to HMRC ahead of time, allowing them to close the more egregious loopholes more quickly. This is a sensible step; it gives the UK fiscal system most of the benefits of a “general anti-avoidance rule” without the constitutional problems associated with such a non-specific piece of legislation. But it requires that there be a sufficient supply of good tax brains hanging around at HMRC to scrutinise the schemes as they come in.
I can only think of two possible explanations. First, that Gordon is being politically savvy and knows that, like speed cameras, tax inspectors are a really efficient way of making sure that the law is obeyed, but that like speed cameras, their very efficiency makes them unpopular. Or alternatively, he thinks that HMRC will be able to make back a lot of the money from the �100 penalties they are bound to reap in from the requirement to file your tax returns at the end of September rather than the end of January. Either way, I say let the athletes jog in the park, and let’s spend some money on building an Olympic-standard inspectorate of taxes.