Tax revenue stalled by tribunals and lack of staff 'in the billions'

Billions in potential revenue is tied up in tax tribunal cases because of a lack of government resources to deal with them, according to HMRC staff. The potential funds due from more than 20,000 cases that have yet to be resolved, would take about 38 years to clear at the present rate, according to an internal estimate by HM Revenue and Customs. Interviews with former HMRC staff, lawyers and accountants, and carried out by The Times, suggested the department was struggling to cope under increasing pressure from big companies and the wealthy to avoid tax bills. Tax officials at HMRC were challenged in the courts by UK Uncut this month following a "sweetheart" deal that absolved banking giant Goldman Sachs frojm paying £10m in back taxes. It was alleged that other companies, including Vodafone, had not been required to pay tax bills of up to £7bn following negotiations with HMRC. The claims also come after comedian Jimmy Carr was heavily criticised this week for his participation in an offshore tax avoidance scheme. The National Audit Office also published a critical report into processes at HMRC and an investigation on maladministration and bad practice is anticipated. But despite an increasing number of challenges from HMRC over such tax arrangements, the department has been struggling under a lack of resources. Gareth Black, president of the Association of Revenue and Customs, the union representing senior tax officials at HMRC, has called for more investment in order to collect more tax and has said job losses had contributed to a failure to collect a further £1.1bn in taxes, which was also echoed in a public accounts committee report. The government has promised to reinvest £917m of savings back into HMRC but Black said cuts to the department – including the further 25% cut in expenditure announced in the spending review – would "further erode staff capacity, staff morale and HMRC's overall ability to close the tax gap". "The government is shooting itself in the foot", Black has said. "Cutting tax-gathering budgets during a period of economic recovery is grossly counterproductive. It will not save money, it will cost money. Tax avoidance will increase, revenues will diminish ... It is simply not possible to cut tax gathering resources while simultaneously pledging to close the tax gap." HMRC has a disproportionate number of senior staff close to retirement and the department's elite specialist investigations unit, which handles the most difficult avoidance cases, is not working as well as it should, some have said. Staff numbers have also fallen, from nearly 100,000 in 2004-5 to 68,000 by June 2010, with numbers likely to fall further to 55,000 by 2015. Experts have also said staff were not being properly trained and equipped for the job. The union called for an additional investment of £260m over the next four years in key areas, including corporate tax avoidance, which would allow it to recoup an extra £6bn in currently lost tax. However, a senior source at HMRC told the Times that it was the tribunal system itself, rather than cuts, that was to blame for undermining the fight against tax dodgers. "We can't control the tribunal," they said. "It's still finding its way. Two years ago they couldn't find enough cases. Now apparently they've got a backlog."