Revenue & Customs Department Should Focus On Black Economy

by Robert Lee, Tax-News.com, London

20 September 2004

A paper prepared by the Chartered Institute of Taxation for the UK government has suggested that a coordinated attack on the black economy will be one of the main benefits of the merger between the Inland Revenue and Customs.

The paper, entitled ‘The benefits of a merger for small businesses’ noted that a balance needs to be struck between the overwhelming compliant majority of small firms, and the small minority that continually “flout obligations.”

It recommended that staff who would otherwise be made redundant be redirected to compliance duties such as regular spot checks.

"We consider that money is well spent in doing this, even if the results are unquantifiable so that they do not figure in departmental statistics. Moreover, we consider that the tax collected from spot checks is likely to cover - if not exceed - the marginal costs involved,” argued the CIOT.

“In short, we believe that the formal economy would benefit (and the shadow economy suffer) from redirecting staff into audit work rather than making them redundant,” the paper declared.

For ‘micro-businesses’ with less than 10 employees, the CIOT stated that the merger would create an additional need for simplicity as fewer staff would mean resources being spread more thinly, meaning time would be "too short for tax officers to research arcane legislation".

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