HM Revenue and Customs

Mark made the following contribution to a Westminster Hall debate on the performance of HM Revenue and Customs:

Let us cut to the chase. Among the vast number of businesses and UK taxpayers, HMRC has a not entirely undeserved reputation as a byword for incompetence, opaqueness and arbitrary action, verging on shambolic. In his passionate opening speech, John McDonnell expressed some specific concerns, and I want to touch on some of the issues.

I am a Member of Parliament who represents a constituency that is an important part of the UK economy, and there is a real problem—we will, no doubt, discuss it at greater length in other debates—about tax and the increasing feeling of unfairness, which is dangerous for society. I have spoken about that in the House, and particularly against the backdrop of the protests at St Paul’s cathedral a little over a year ago. Many—dare I say this?—middle-class Conservative voters feel that somehow the rules of capitalism are skewed against them. The narrow politics of that is obviously dangerous, but it reflects a real feeling of concern about where we are going with tax.

I want to mention a few warning signs about some elements of the political game scoring that goes on. We need a far better pre-clearance system, certainly if we are to have a new anti-avoidance rule that is both equitable and, more importantly, effective. The Government have it clear that they want to introduce such a rule in the Budget within six or seven weeks. Therefore, the pace of change of tax law must alter. I have served on many Finance Bill Committees, both as a Front Bencher in opposition and as a Back Bencher in government and opposition. Our system is horribly and terribly complex, and our code is much longer than the much-derided Indian system of the past. We should all aspire to a simpler tax system because complexity is the godfather to the complex avoidance schemes that we have heard about at great length during this debate.

Taxation of small businesses must be better understood. I was a small business man for seven years before I became a Member of Parliament in 2001, but thank goodness, I am not still in business. I speak to businesses of a similar size in my constituency—I had a dozen staff with a £2 million turnover—and they have appalling problems trying to get their tax right, not just with HMRC, but with all tax authorities.

There is a danger that, in the perennial chatter about the failings of the tax system and politicians’ understandable reluctance not to play to the gallery, tax regulation will become much more arbitrary. One of this nation’s greatest assets as a place to do business is our reputation as a predictable, reliable and certain jurisdiction that is underpinned by the rule of law. We undermine at our peril that timeless tradition of being an open place to trade and prosper.

If large international corporations are arranging their affairs to avoid playing their fair share of tax, Governments and Oppositions—at least, Front Benchers—should cease moralising about that and get back to legislating such loopholes out of existence. The sheer complexity and size of the UK’s tax code, which is now larger even than that in India, has created the highly remunerated guild of tax avoiders, of which my hon. Friend Ian Swales may have been a member.

What should worry us most is that, when the tax authorities are empowered to make ethical judgments on the affairs of global corporations, before long they will turn their attention to ordinary taxpayers—the easy target—who may not have access to an army of professional advisers to allow them to make a long and protracted case. Ordinary taxpayers have every right to feel that once settled, their tax affairs should not be reopened on a whim.

My impassioned plea is to use our money wisely. I appreciate that, in the resources battle, it is not easy at this difficult time to justify employing vastly more people, but we need a much better relationship and more co-operation between tax advisers, companies and individuals, and HMRC, instead of its role being portrayed as a battle with a presumption that every taxpayer is trying to rip off the system. I hope that we will have better pre-clearance and that such debates will be consigned to history.