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Cuts will boost avoidance: HMRC managers

Union to warn MPs against spending review plans

The planned cuts to HMRC’s expenditure could lead to an upsurge in tax dodging and a widened tax gap, influential MPs will be told today.

The Association of Revenue and Customs (ARC), the trade union that represents the department’s senior managers, is set to warn the Treasury sub-committee that reducing the taxman’s budget is likely to undermine the capacity to identify and clampdown upon serious instances of avoidance.

ARC president Graham Black and his predecessor, Terry Cook, are scheduled to give evidence this afternoon to an inquiry into the Revenue's effectiveness. They plan to raise the issue of reducing staffing: the 99,179 individuals employed in 2004-05 had been cut to 68,037 by June 2010.

‘HMRC are made up of world-class tax professionals, and the Government must realise that we need to invest in… our staff to claw back the money that should be helping to beat the deficit,’ said Mr Black.

The most recent official estimate of the UK’s gross tax gap – the amount that is chargeable but uncollectable – was £42 billion. ARC claimed the Revenue’s future ability to recoup additional taxes would be eroded should the Government enforce its demand – announced in last year’s spending review – that the department trim its resources spending by 15%.

The Treasury has pledged to set aside £900 million to combat tax avoidance, evasion and fraud, but the money will be recycled from savings made elsewhere in the Revenue and will do little to offset the damage of overall budget cuts and reduced staff, said the union.

Terry Cook added, ‘HMRC generate income for the Government and must be treated differently from other departments. Cutting tax-gathering budgets will not save money; it will cost money. Tax avoidance will increase, revenues will diminish.’

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