Building a trusted, modern tax administration system... am I missing something?

 

Alright, I admit that how our taxation system is administered is perhaps not high on the agenda of many of you out there. But, perhaps because I am part of the current tax administration system, I take a closer interest in the topic. After all, shouldn't the organisation which raises £600 billion for public spending be of interest to anyone who cares about governance?

Five weeks ago, HM Treasury and HM Revenue & Customs published "Building a trusted, modern tax administration system", which outlines a path towards a major overhaul of how taxation is administered over the next decade with, as you might expect, a significant emphasis on digital transformation. Naturally, I support anything which makes the taxation system easier to navigate for customers of HMRC - less time spent managing your tax affairs means more time to run the business, make profits or spend time with your loved ones and other interests.

And, over the thirty-four years that I've worked for HMRC, I've seen some enormous changes in how the system works, indeed, when I joined in 1986, we were still issuing paper assessments which required mountains of carbon paper (look it up if you're so young that you don't remember it), and an army of clerical staff to shuffle paper, transport it and store it so it could be retrieved later. Filing ranges full of highly flammable paper, repositories and increasingly complex references, these were a part of everyday life. Now, I press a button, and a machine springs into life hundreds of miles away prints my letter and envelopes it so that I never see a piece of paper.

Technology is, inevitably, more efficient than people, more reliable, less likely to fall ill (although when it does...) and produces a consistency of outcome that is desirable in a system which is bound by a set of published rules.

In truth, the prospects of a world where businesses upload information directly into HMRC's computer systems holds little real fear for me. It is, it seems to me, an inevitable result of the opportunities that digital technology creates. Besides, I'll be gone within twelve years anyway...

However, I am troubled by one aspect of the report, or rather the aspect which is noticeable by its absence, i.e. the people who will deal with the public facing stuff - compliance, recovery, advice. There is no reference at all to the people who will manage the brave new world of HMRC.

You see, a trusted, modern tax administration system requires bright, motivated people to do the things that technology can't. A computer program can assess the relative risks generated by the entries in a tax return, but only a human can go out and test the explanations given by the customer, or judge what is missing. Only a human being can negotiate payment schedules, or determine whether or not a reference is correct or not where the answer is unclear, or variable.

Salaries in HMRC are increasingly uncompetitive, with clerical staff increasingly being caught up by the National Living Wage - that contact centre staff member you're asking about your tax repayment is increasingly likely to be being paid the same as they would be stacking shelves in Tesco - and technically trained tax inspectors are easily tempted by the remuneration levels paid to tax advisors in the private sector.

Ensuring a trusted, modern tax administration system does imply that you can trust the skills of the people who manage it at every level, and you can recruit and retain the calibre of staff you need only by providing a competitive package of pay and benefits. Otherwise, you risk having a system like that of the Wizard of Oz, impressive looking on the outside but, once you pull back the curtain, increasingly ramshackle underneath.

There is only one thing more expensive that good administration, and that's poor administration, and reliance on only one aspect of what should be a holistic package of reforms undermines even the best of intentions. But, in a world where civil servants often seem to be treated as mere production units rather than partners in reform, perhaps I shouldn't be all that surprised...