Plans to save money at HM Revenue & Customs by moving more of its operations online are leading towards a repeat of a “catastrophic collapse” in customer service, according to parliament’s spending watchdog.
The public accounts committee said it was not convinced that the tax authority had a credible plan to prevent a “disastrous decline” in service while facing spending and job cuts, office closures and the implications of Brexit.
MPs believe it is possible that tax officials could experience a similar collapse to 2015/16, when members of the public were left waiting for around 4m hours for telephone calls to be answered following a reduction of 5,600 in staff numbers. They also questioned whether HMRC might be “painting too rosy a picture” of its success in reducing the gap between the amount of tax due and the total collected.
The warnings come days after Philip Hammond pledged in the autumn statement that HMRC will retrieve £2bn lost to the exchequer via tax avoidance but was criticised for failing to pledge extra resources towards its revenue-raising department.
Meg Hillier, the committee chair, said it was disconcerting that concerns were being raised about HMRC customer service so soon after the previous problems. “The lack of a convincing fall-back plan to safeguard service as HMRC undergoes significant change remains a looming threat to its ability to collect tax from individuals simply trying to pay their fair share,” she said.
“HMRC’s senior management cannot afford to be complacent about the catastrophic collapse in customer service in 2014/15 and the first half of 2015/16, nor about what is at stake should their projections about demand for call centres prove wrong.
“Contingency planning should not be an optional extra. By the spring, we will expect to see evidence that HMRC has agreed measures with the Treasury to ensure it is not left playing catch-up at taxpayers’ expense.”
The tax authority aims to save £98m by 2021 by cutting the number of customer service staff by a third and encouraging more people to sort out their personal tax affairs online, the report said.
Led by its executive chair, Edward Troup, the changes are supposed to involve a 16% overall reduction in staff, with others being moved into specialist work on tax avoidance and evasion. More than 130 tax offices – 90% of the total – will be closed as workers move to 13 regional centres.
MPs said the tax authority is “staking a great deal” on the readiness of taxpayers to switch to digital to file their tax returns, and claimed it “lacks an adequate plan” to cope if demand at its call centres does not reduce as quickly as hoped.
The committee called for greater transparency about the tax affairs of multinational corporations “to increase the pressure on them to pay their fair share of tax”.
In previous statements, HMRC has claimed to have cut the “tax gap” – the difference between how much tax should be collected by HMRC and how much is actually collected– from 8.3% in 2005/06 to 6.5% (£36bn) in 2014/15. But the report has questioned HMRC’s method of calculation.
“HMRC’s measure of compliance yield also contains a high degree of estimation and projection, and it is not clear whether these estimates are realised in terms of extra tax being collected,” the report said.
Tax officials also told the committee that they expected Brexit to have an impact upon a number of its functions, including customs and excise duties, social security and the administration of VAT.
Referring to leaving the EU, the report said: “HMRC noted that if demand did not reduce in the way it expected, it would have to ensure that adequate levels of staff were well in place to meet taxpayers’ needs.”
On Thursday, the work and pensions committee castigated both Concentrix and HMRC for a series of disastrous errors that amounted to “a gross failure of customer service”. The public accounts committee has restated their concern about the “unnecessary hardship and suffering” to tax credit claimants caused by HMRC’s failed contract with the private US firm.
Responding to the report, an HMRC spokesperson said the authority consistently answer 90% of calls first time in an average of less than five minutes, and has invested heavily in customer services, recruiting more than 3,000 new staff and a range of digital channels for customers.
“Efforts to crack down on tax avoidance, evasion and fraud have secured £26.6bn over the last year. We’ve also led the way on improving global tax transparency and tackling tax avoidance by multinationals,” he said.
The Public and Commercial Services union head, Mark Serwotka, said the tax authority was continuing with cuts despite obvious concerns from a parliamentary committee and the public. “The committee again makes it clear that cutting too many staff in HMRC damaged the service provided to taxpayers, yet the department is absurdly pressing ahead with plans to close 90% of its UK offices and axe thousands more employees,” he said.
“There is now an overwhelming case for these plans to be halted to allow for a proper public debate and parliamentary scrutiny of the kind of revenue collection service we need and the staff and resources it will take.”
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