UK Group Says Don't Blame Inland Revenue For Self-Assessment Flaws

by Amanda Banks, Tax-News.com, London

15 May 2002

The Tax Faculty, the ICAEW's designated focus group for chartered accountants working in the area of tax, has responded to a report published last week by the Select Committee on Public Accounts, on the self-assessment system in the United Kingdom.

Allthough the body announced that it welcomed the report, it objected strongly to the scape-goating of the Inland Revenue service, arguing that the government must take at least some of the blame for the current shortcomings and complexity of the self-assessment tax regime.

The three main conclusions reached by the Select Committee were that:

- No-one knows exactly how large the 'hidden' economy in the United Kingdom is, making it difficult to assess the Revenue department's efficiency in addressing the problem. The report suggested that the IR should attempt to gain a better knowledge of the risk areas in order to measure its performance at reducing them.

- Limitations inherent within the Inland Revenue's management and information systems mean that their efforts to increase self-assessed taxpayer compliance are almost always hampered. The Select Committee recommended that the tax authority should become better informed as to the effectiveness of sanctions to encourage prompt filing, given that the proportion of returns submitted on time is falling.

- The Inland Revenue department's aim should be to devise a system, and guidance to run in parallel with it, which is simple enough for self-assessed taxpayers to comply without needing to resort to expensive tax advice.

However, the Tax Faculty took issue with several of the points made in the Select Committee's thirty-third report, most notably the suggestion that it is the tax department's job to simplify the system:

'This is somewhat unfair to the Inland Revenue,' the Tax Faculty explained late last week. 'The Revenue has been buckling under the strain of constant reform and increased complexity and, whilst some of these changes and problems are at the Revenue's behest, much of it results from initiatives that emanate from government.'

The statement continued: 'The Report rather implies (although we don't think it is intended) that Government has all the power but doesn't wish to carry any of the attached responsibility'.

Although the Tax Faculty admitted in its response that there are processing problems, 'and often a lot of them', which are the responsibility of the Inland Revenue, and can be ironed out 'in-house', it said that the buck should stop with government lawmakers, arguing that: 'If you devise a complicated system and keep changing it, you are bound to end up with all sorts of errors.'

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