Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
HMRC lacks effective methods to monitor deterrent effect of reduced prosecutions.
Conclusion
We asked whether such significant reductions in prosecutions risks weakening the deterrent effect of HMRC’s work, which could lead to greater levels of non-compliance. HMRC told us that while it wants to see serious tax crimes addressed in the most effective way, it is not seriously concerned that the reduction might weaken the deterrent effect. It argued that the publicity around high-profile convictions, as well as its use of other enforcement tools such as civil powers, is sufficient to maintain a credible deterrent.17 However, it does not have a way to monitor this. This Committee has previously recommended that HMRC should measure the deterrent effect of its work, but it concluded 9 Q 46; C&AG’s Report, para 9 10 C&AG’s Report, para 19 11 Q 46 12 Q 80; C&AG’s Report, para 1.10 13 Qq 44, 80; C&AG’s Report, para 19 14 Q 47; C&AG’s Report, para 16 15 Qq 48–52 16 Qq 53–54; C&AG’s Report, para 16 17 Qq 47, 55 10 Managing tax compliance following the pandemic that it could not do so.18 There may be scope for HMRC to make more use of the expertise of academics, for example using its Datalab which provides trusted researchers with secure access to anonymised data.19 Compliance yield
Government Response Summary
The government agrees with the committee's observation, stating that tax crime prosecutions are expected to increase and HMRC will commence new work in 2023-24 to understand the deterrent effect of its criminal investigations, with a target implementation date of June 2024.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation Target implementation date: June 2024 2.2 Tax crime prosecutions are expected to increase in future years with a focus on the highest-harm and most serious cases of fraud. HMRC will commence new work in the 2023-24 financial year to understand the deterrent effect of the department’s criminal investigations resulting in prosecutions. The exact timeframe and scope of this work (including the methodological approach required) will be informed by an initial internal analysis and is dependent on the availability of appropriate data.