George Osborne’s decision to cut HMRC’s budget is counter intuitive

The Chancellor’s decision to cut HMRC’s (Her Majesty’s Revenue and Customs) budget is counter intuitive, will do more harm than good to the UK economy in the long term and should be urgently reconsidered, ACCA (the Association of Chartered Certified Accountants) has warned today.

Chas Roy-Chowdhury, ACCA head of taxation said: “The deficit is clearly a huge challenge facing the government and we know there needs to be cuts to public spending but you have to careful about where you cut. Last October it was reported that the UK tax gap may be as wide as £32bn. The size of this figure begs the question – how are HMRC going to narrow this gap when the government are cutting their resources.

“If HMRC could make serious inroads in to narrowing the tax gap we would all be better off. We do not expect HMRC to have an unlimited budget but we would expect the Chancellor to realise that cutting their budget reduces their ability to collect taxes. The Chancellor has said that austerity will last beyond this parliament so he is clearly looking at the long term health of the economy and he needs to take the same view with tax collection. He needs to find extra resources for HMRC now for them to play their part in the long term aim of reducing the budget deficit. With tax collection we need to “spend to save” that is to ensure we close the tax gap efficiently and effectively.”

HMRC estimates the tax gap at £32bn, although some believe it to be more. This estimate is made up from tax owed from behaviours such as avoidance, evasion, the hidden economy and non-payment. Visit http://www.hmrc.gov.uk/statistics/tax-gaps/mtg-2012.pdf for more details of how HMRC calculate this figure.

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Notes to Editors1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.2. We support our 162,000 members and 426,000 students in 173 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 89 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.3. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.