Thank you for inviting me to speak to you today.
This is a very timely occasion, taking place as it does, at the same time as today’s G8 summit in Northern Ireland, where tax and tax transparency are due to be high on the agenda, and a week before the Government’s latest Spending Review announcement — a particularly notable event for anyone who works in Whitehall, I can assure you!
And of course this is also a time of huge — some say unprecedented — public interest in all matters tax, and tax avoidance in particular.
Against this back-drop HMRC will shortly publish our Business Plan for 2013-14. This sets out how we will continue to tackle tax avoidance, improve and modernise our services to taxpayers and their agents, and how we will continue to drive down our operating costs.
Before I talk in more detail about our priorities for 2013 it’s worth taking a moment to reflect on the scale of my organisation.
We have 70,000 staff, who collectively help bring in £474 billion in tax revenues, from more than 45 million individuals and 4.8 million businesses, making sure that money is available to fund our public services.
We also support nearly six million families with Tax Credits and pay out Child Benefit for almost 14 million children. There are not many other organisations, in the private or public sector, which can claim to deal with so quite so many customers.
I do not think I exaggerate when I say that the business of HMRC touches almost everyone in the UK. And I am only too aware of the responsibility we have to the country, to individual tax payers and to businesses like yours, to do the best job we can.
I also want to share some highlights with you on where we’ve got to over the past twelve months, because they show that HMRC is in a very different place to where it was one, or two years ago:
- we have collected record additional revenues of almost £21 billion, beating our target by some £2 billion – thanks to the additional £1 billion the Government has invested in HMRC to tackle avoidance, evasion, error and fraud
- we also reduced the amount of debt owed to HMRC by taxpayers by £300 million last year
- on customer service, we achieved our target to answer 75 per cent of calls, on average, throughout the year. But in fact, over the last six months we have answered more than 90 per cent of calls; this is a huge improvement on our performance in 2010-11, when we were only able to answer 48 per cent
- we turned around 85% of post sent to us within 15 days – our best-ever performance, and a huge achievement, given the fact that we receive more than 70 million items of post every year
- we have also brought PAYE up to date – for the first time ever – clearing all 18 million outstanding legacy cases
- these results have been accompanied by improving feedback from customers through the various surveys we do.
I’m particularly proud of these results as we achieved them while continuing to make efficiency savings in all areas of our business – through our people, our IT and our estate.
And I’ve no doubt that an improved performance across each of our three main objectives – revenue, service and costs - was an important factor in the decision of Ministers to give us an additional £77 million in the Autumn Statement to further tackle avoidance and evasion.
I want to assure you that many of the things that have concerned tax professionals are matters that we have been working so hard to put right. And I believe we are succeeding – in many cases thanks to your feedback, and your willingness to work with us.
I very much hope that some of you here today have noted an improvement in the service you’ve received from us. I say ‘some’, because I know that there is more that we have to do to deliver good performance consistently across all parts of our organisation and to deliver a strong performance consistently through the year, not withstanding its peaks and troughs. And I really do look forward to hearing from you shortly on where we still need to do better.
Priorities for 2013
I now want to address our current priorities, as that is what you have invited me here today to discuss. The next two years will continue to be challenging, but given the momentum we have established, I’m confident that we can deliver further improvements in our performance.
I want to start by talking about our service standards.
First of all we know that we need to continue to improve customer service standards and we are working hard to do this.
We have already reprioritised our resources to employ a thousand additional staff in our contact centres and this has been a major factor in our being able to answer 90 per cent of calls in a period that included the Self Assessment filing deadline, the High Income Child Benefit Charge opt-out and the introduction of Real Time Information.
This, combined with a greater flexibility in how we deploy resources across the Department is, I believe, a very positive step forward.
For this year, we introduced a new target, to answer 80% of calls within five minutes. And the introduction of new 0300 numbers for a selection of our help lines is also cutting the cost of calling HMRC for most of our customers.
We recognise though that this is not an end point: it is one step on a journey to reduce the waiting time even further.
We are simplifying letters and guidance, and using automated messages to provide information and direct customers to information on the HMRC internet. This has reduced the need for our customers to speak to contact centre advisers.
Alongside this work we will, over the next three years, expand the range of digital services to include a more joined-up digital experience for our business customers. This will provide an overview of their HMRC ‘account’, links to all their online transactions and a facility for accessing tailored help and asking HMRC questions.
These services will also be made available to tax agents to use on behalf of their clients under the proposals in the Tax Agent Strategy.
We are also redesigning and delivering ‘digital by default’ services across HMRC with the aim of making them so straightforward that all customers who can use them will choose to do so. This includes moving to GOV.UK, developing an Assisted Digital Strategy to help people who cannot easily use digital services and improving more HMRC services by making them digital.
I’ve already mentioned Real Time Information. I think it is fair to say that it’s gone much, much better than many people thought it would – and as well as we realistically expected at HMRC. More than 1.4 million businesses are now reporting in real time and we now have a million micro businesses – those with fewer than ten employees – on board.
We do understand that there is some initial work for business to do. But we do believe in time that it will make PAYE reporting easier for business, increasingly help us get tax right in year and also cut fraud and error in the benefits system.
We appreciate that for many businesses, especially smaller ones, this is a year of transition. So I’m pleased to be able to say that we have agreed to extend the reporting concession for businesses with fewer than 50 employees until April 2014.
Of course, I couldn’t come here today and not say anything about tax avoidance, could I?
It’s fair to say that we have for some time been accused of being too cosy with big business. Those of us involved know that this isn’t the case.
For my part, I believe that we work constructively together. But that is not a relationship I would characterise as cosy. Nor would we want it to be. What is good for HMRC and for our customers is an open and challenging relationship.
All sides have worked hard to build up the trust to make this possible.
I want to be clear that, tax avoidance involves a minority, and a small minority at that who are trying to bend the rules. The vast majority of the UK’s businesses and individuals are honest and pay their share towards funding public services.
What I see as important is to make sure that we have a clear, strategic approach to tackling that minority, whoever they are, dissuading them as far as possible and challenging them when they persist.
HMRC recently published ‘Levelling the tax playing field’, which updates our anti-avoidance strategy, and shows the considerable success we have had in tackling tax avoidance since 2010.
Our High Net Worth Unit has delivered more than £500 million in additional tax revenues from wealthy individuals as a result of its compliance work. We have also collected more than £14.8 billion in additional compliance revenues from large businesses since 2010, including £1.5 billion through increased efforts in tackling transfer pricing.
Tax avoidance makes up around £5 billion, or 14%, of the total tax gap (the difference between the total revenues that we collect and the total amount of tax that is theoretically due) which currently stands at £32 billion.
As you might recall, the Government made £917 million available to us in 2010 (and a further £77 million in 2012 that I’ve already mentioned) to target avoidance, evasion and fraud. As a result we will bring in an additional £22 billion a year in revenue to the Exchequer by 2014-15
So how will we achieve this?
In terms of building on some of the results I’ve just mentioned, we are increasing the number of specialists working on compliance, improving their skills and investing in the data and technology to identify and tackle tax avoidance and evasion.
Around £30 million of the Government’s investment in the Department is being used to further strengthen risk assessment capability across large business and to speed up the Department’s work to identify and challenge multinationals’ transfer pricing arrangements. This is expected to bring in an additional £2 billion over the five years to 2017-18.
We have stepped up our communications to taxpayers, warning them of the risks of tax avoidance and the likelihood that marketed avoidance schemes will not succeed.
We are also working with accountancy representative bodies to build a better understanding of the markets in which their members operate, of information sharing, of their disciplinary codes (to deal with members whose involvement with schemes contravenes their standards) and to improve communication on tax avoidance to their members
And we are setting global standards for dealing with tax avoidance and encouraging international co-operation to tackle tax avoidance, close loopholes and identify abuse.
For example, our legislation requiring disclosure of tax avoidance schemes, and the way we have developed relationships with our customers, have both been endorsed by the Organisation for Economic Co-operation and Development and adopted by other countries.
The Prime Minister has said that transparency will be a key theme for the UK’s presidency of the G8 and this, as we are seeing this week, is being reflected in the G8 discussions in Northern Ireland.
Helping developing world economies to collect tax domestically will be a large part of the G8 agenda. This will be done through building expertise while also ensuring that these countries have all the information they need to collect the right amount of tax.
The UK’s G8 Presidency will also focus on strengthening international tax standards and working on greater international tax information exchange to tackle tax havens. This will build on work that is already underway in the OECD and maintain the momentum set by the G20.
Tax avoidance – while important – is not our only issue of concern, which is why we also focus so relentlessly on evasion, fraud, debt, the hidden economy and criminal attack.
So, we are putting an increasing focus on tackling debt, and reducing Tax Credits fraud and error. We are launching a new private-sector trial alongside our own efforts to cut fraud and error in the benefits system.
In future, we will step up this work, by making better use of technology and investing in our capability.
Throughout all of this we continue to work closely with tax professionals, businesses and your representative bodies to build a better understanding of tax avoidance markets and how we improve our communication with their members.
That is a flavour of how we at HMRC are upping our game. And how constructive engagement with tax professionals like you, and the organisations you represent, is helping us identify what we need to focus on, and helping us to achieve our objectives. I hope we will continue to work together constructively as that is the best way that your businesses can ensure that your tax affairs are properly conducted and we can ensure that the tax that is owed is collected and available to the Government to fund the public services from which we all benefit.