I decided to watch the meeting of the Parliamentary Accounts Committee yesterday afternoon when they were questioning senior management from HMRC on the department’s accounts for 2011/12. The HMRC team was led by Lin Homer, HMRC’s Chief Executive.
It was initially slightly amusing but very quickly became quite depressing. Not, ironically, because of any of the performance issues highlighted in a review of HMRC’s accounts, but because of the performance of the various protagonists.
Actually, it started badly for Lin Homer when she was unable to answer the opening question as to whether or not HMRC’s estimate of the tax gap included tax avoidance. To be fair, it was a rather silly question, as a cursory read of HMRC’s document Measuring tax gaps 2012 clearly shows that it is included (ignoring, for now, any question of the “correct” measure) – Margaret Hodge, chair of the Committee, will have read that report in preparation for the meeting, won’t she? However, notwithstanding the silliness of the question, isn’t it reasonable to expect HMRC’s Chief Executive to know the answer to such a straightforward (and topical) question?
By the end of the proceedings (actually, quite a bit earlier than that), I was struck by the fact that here we had a group of MPs who clearly had very little understanding of the way the UK’s tax system works, criticising HMRC for the failings of that system. Which is all well and good, but perhaps they should remember that it is Parliament (i.e. these very MPs and their colleagues) that legislates our tax system in the first place.
Throughout the meeting, there were many examples of MPs clearly misunderstanding the way the UK tax system works. We heard Margaret Hodge claiming that the UK regime was generous for large companies because “HMRC wants them to come here” – err, no, it’s the Government that wants them here, HMRC is implementing Government policy. Margaret Hodge (again) suggested that KPMG were telling clients that the effective CT rate would be 5.5% from 2014 – actually, if she’s referring to the KPMG briefing note that I think she is, then that relates specifically to the finance company rate in the new CFC rules. Rules, by the way, that these very MPs will have read in the Finance Bill 2012 and voted on in the House only a few months ago. I could go on but you get the point.
It really was quite depressing. These are the people who would run our country and who are responsible for creating the tax laws that we have to operate within. And there they were, like a pack of kids, seeking to score populist points and showing up their complete lack of understanding of the system for which, ultimately, they are responsible.
What is really frustrating is that there is a real debate that needs to take place on the issue of “tax avoidance” (including what we mean by that term). This behaviour does nothing at all to move that debate on.