Revenue will struggle under spending cuts, experts warn

Tax experts fear that HM Revenue and Customs will struggle to combat tax avoidance and serve the public as it copes with cuts to its departmental budget.

Although yesterday’s comprehensive spending review committed £900 million investment into specific initiatives to clamp down on tax evasion and avoidance it also cut 15% of the Revenue's budget.

Philip Fisher, tax partner at accountants PKF, said: ‘The purpose of HMRC is to protect and recover tax revenues and, having already lost so many senior people, if it is cut even further the consequence will inevitably be a net loss to the Exchequer.’

Fisher said HMRC was already struggling to do its job and retrieve the estimated £40 billion lost from tax evasion and avoidance. He said the cuts were incompatible with the aims of the multi-million ring fenced investment.

Robin Williamson from Low Income Tax Reform Group (LITRG) said that while HMRC needs to chase lost taxes it also has a core responsibility to help normal people.

‘Reclaiming lost tax revenue is what HMRC should do. However, we should be carful how we bracket error and fraud. People who are perfectly willing to pay the right amount of tax might struggle with the complexities of the system…there are still too many errors dealing with customers.’

Williamson said HMRC had a wide range of responsibilities beyond tax evasion and needed to be greater investment in training front line staff.

‘They need to be much better at helping people deal with the tax system. Its budget is going to be cut by 15% but it has many other responsibilities apart from chasing people offshore.’