Creation of HMRC is a Golden Opportunity to Encourage Greater Tax compliance says IoD

26 July 2006

Business Leaders today called on the Government to tackle the complexities of tax compliance as the Government decide what new powers HM Revenue & Customs (HMRC) should have. 

The main goal is to get us to comply with tax law yet there are signs that the Government is not clear about what this means, argues a report by the Institute of Directors (IoD). The Government has a constant urge to confuse two things, compliance with the law and our paying the tax that they would like us to pay.

The IoD report also says that officials need to grasp the concept of an entirely innocent mistake. When taxpayers make such mistakes, officials should only seek payment of the tax lost, and not a penalty. Many already show this taxpayer-friendly attitude, but not all do. It is the right attitude, because most taxpayers are honest and want to pay the amounts required by law.

Richard Baron, Head of Taxation at the IoD said:

“Ultimately taxpayers would be better able to comply with the law if it were simpler. The most effective tools to maintain high levels of tax compliance are already in the Government's hands. They just have to make the system simple and respect the honesty of the vast majority of taxpayers.”

There is a heavy responsibility on Ministers to propose a tax system that does its basic job of extracting money from people well, and not to make the tax system more complicated by using it to do lots of other jobs. The IoD has been arguing the case that only a comprehensive reform of the tax system will be the most effective solution to tax avoidance. 

Richard Baron added: 

“The current tax system is too confusing, complex and convoluted. To encourage an even greater environment of compliance, the Government should take the creation of HMRC as an opportunity to comprehensively reform the current tax system.”