Just as taxpayers finally lose confidence in the ability of the Revenue to calculate PAYE correctly, HMRC offers to take the matter out of our hands and present us with a fait accompli. The power grab implicit in the latest HMRC proposals – currently under consultation - to receive all salaries direct from employers, process all deductions and then hand to us what remains, should worry anyone who values freedom.
On Wednesday HMRC Chief Executive Dame Lesley Strathey told the Treasury Select Committee that the Revenue was backing down on its threat to charge taxpayers interest on repayments of tax underpaid through Revenue error. But there is no sign yet that “Centralised Deductions” will be strangled at birth.
Presented as a way of reducing administrative burdens on employers, this proposed system would put much greater power in the hands of HMRC. According to the consultation paper Improving the operation of Pay As You Earn (PAYE) (see customs.hmrc.gov.uk):
“The employer would send the gross payment through the electronic payment system to a central calculator where the deductions calculated by HMRC would be made automatically. The resulting net payment would then be sent to the individual’s bank account and the deductions would be paid directly to the Government.”
The consultation paper acknowledges that this could also increase what is described - with delicious irony - as “avoidable contact” with HMRC officials. In other words, endless frustrating telephone calls to your tax office trying to find out if you really have paid the right amount of tax or if the deductions are based on pure guesswork (or on someone else’s records).
The consultation, which opened at the end of July and closes on 23rd September 2010, invites “all groups of people who might be affected” to discuss the practicalities and issues involved. But there is a strong hint that the proposals will not be lightly abandoned; HMRC is “interested in hearing proposals that could deliver a similar or better outcome through different means.” In other words, if you don’t like it, come up with something better.
The acceptance by citizens – albeit reluctantly - of the concept of direct taxation might be said to rest on an unspoken understanding between tax collector and taxpayer that tax will be levied fairly and accurately. We surrender a part of our earnings to the State in order to share in a social good. But when an agent of the State takes the goodwill of its citizens for granted, especially when its own fairness and accuracy are in question, institutional arrogance threatens to undermine the social compact. This is no time for a taxpayers’ revolt – so let us hope the Treasury will change tack and halt the Revenue’s power grab.
