Unions representing tax officers are challenging government policy on reducing the current account deficit. They say it’s not possible to increase tax revenue at the same time as closing offices and cutting staff in Her Majesty’s Revenue and Customs (HMRC).
Senior tax inspectors belonging to the First Division Association (FDA) union say that the coalition government is focussing too much on spending cuts and possible economic growth and not enough on collecting all tax owing. Their sister union, the PCS (Public and Commercial Services Union), has been campaigning to keep offices open and to draw attention to the tax gap which damages the provision of public services.
The inspectors launched a campaign titled “Tackle the Tax Gap: Defeat the Deficit” last year and stepped up publicity and lobbying in the run up to the Budget. A joint meeting in the House of Commons on 16 March with tax accountants, MPs, and Lord Oakeshott, the former LibDem Treasury spokesman, publicised the latest estimate of the gross tax gap at approximately £52 billion for 2008/9, an increase of £4 billion on the previous year.
Every developed economy has a “tax gap”, the difference between taxes due under the law and the amount paid voluntarily. It is never closed, but the approach of governments to tax evasion can make a big difference.
The FDA believes that an alternative to spending cuts and increased taxes is to ensure that everyone in Britain pays the taxes they owe. HMRC action managed to bring in an extra £12 billion last year, but still the gap went up overall. The union claims that an investment of £250 million over four years in resources particularly to tackle corporate tax avoidance, could recoup £6 billion of the tax due. That’s comparable to all the spending cuts for the last tax year announced in the Budget last June.
As a result of its spending review the government told HMRC to deliver savings of 25 per cent – more than £1 billion by 2014-15. That represents a further loss of 13,000 staff over the 30,000 cut since 2005. The government promised to “reinvest” £900 million of the savings made into “targeted resources” but the union says that does not go nearly far enough and does not represent new resources. Workers in HMRC know it is not possible to make the level of staff cuts at the same time as closing the tax gap.