Richard and the tax gap

This was prepared for elsewhere but not in the end used:

There is joy in heaven and sniggering down here upon Earth as Richard Murphy gets a jolly good spanking from HMRC over his quite lunatic estimates of the tax gap. You\’ll have seen him, heard him perhaps on the radio, popping up to claim that there\’s £120 billion that should be collected. Just collect that and all our economic and financial problems are over.

The full whipping is here in Hansard. As an example of the asininity of the Murphmeister\’s \”estimates\” try this:

The figure for unpaid tax of £28bn that Tax Research UK use is a snapshot of the total amounts owing to HMRC on a particular day. We think this gives a misleading impression of tax that is lost. Most tax paid late is collected within a few days, and over 90pc is eventually collected. Therefore the figure we include in our tax gap estimate shows only the amounts we don\’t ever collect. 90 per cent of this arises because of insolvency.

That is, the Murph claims £28 billion, but once we\’ve accounted for the people who pay late but do pay and those who go bust the actual unpaid tax unpaid is some £400 million. Less than 0.1 per cent of tax collected. I\’d be absolutely astonished to hear that any other organisation in the country manages to get its unpaid receivables down that low.

It really doesn\’t support his continued insistence that HMRC should double the number of staff it has. For, and here\’s the real story, that\’s what Murphy\’s ever more phantastical estimates of the tax gap are about.

Our story starts here, back in 2004, when Gordon Brown decided to merge the Inland Revenue and Customs and Excise to create HMRC. The point and aim of this was to enable the firing of some large number of the people in the now conjoined offices. Brown actually said this was the point. By 2006 there were 37,500 redundancies in the pipeline as duplication could be eliminated. Reducing the total headcount in HMRC by approaching 50 per cent.

Now, if you were the leader of the union that represented those taxmen what would you do?

Here I must wander off into opinion, supposition on my part. But I would look around for some vaguely numerate hack who was willing to take my union\’s shilling to produce reports proving that vast sums of taxation were not being paid as they righteously and justly should be. In each such report I would insist on a few paragraphs about how we really must stop this slaughter of the innocents and have tens of thousands more taxmen where they belong, sitting behind a desk sucking pencils and coughing up regular union dues.

Now that\’s what I would do because I\’m an evil manipulating neoliberal b\’stard. What they did actually go off and do, I\’m not sure:

Richard Murphy, a campaigner who calculated the £120bn estimate, rejected HMRC’s criticisms. He called on HMRC to increase staff levels and crack down on small companies that were not filing tax returns or company accounts.

Mark Serwotka of PCS, a union representing HMRC staff, said:
The tens of thousands of staff in HMRC know that Richard is not overstating the tax gap, and they know that as well as it being an issue of political will, the problem is one of staffing.

With 10,000 more job cuts planned by 2015, the government stands no chance of tackling this, when even a modest dent in the billions lost to our exchequer would change the debate about public spending overnight.

Quite which latin tag this falls under I\’m not quite sure: quis custodiet ispso custodes isn\’t quite it, perhaps cui bono is closer? Your evocations of ancient wisdom in the comments please.