Authority and Responsibility

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I received here today a letter dated 10th August 2012 which was a response to a letter we sent HMRC on 20th April 2012. The letter said they had received my letter, that these matters were dealt with in strict rotation and that they would reply to my letter as soon as possible!

At the same time, taxpayers and accountants given enquiry requests from HMRC are told in no uncertain terms that if they do not reply to letters from HMRC within (usually) 30 days taxpayers will face increased fines and penalties for 'non  co-operation'.

And there lies a major reason why HMRC do not command respect from taxpayers. It isn't just the correspondence of course, that is a symptom of something much more important.

In all of my business life, and indeed in life in general, I was taught that Responsibility and Authority must be evenly matched. If you have the Authority to do something then you are Responsible if it is not done. Conversely if you expected to be Responsible for something then you mjust be given the appropriate Authority to do it.

But HMRC's regulations cast in very strictly applied laws are the exact opposite of this; HMRC have massive Authority to demand of taxpayers, but they are not in the slightest Responsible to them at all. Under self-assessment (now pretty much applicable to all taxes) the taxpayer alone is Responsible for submitting returns, paying tax on time, and so on without HMRC having any requirement to remind, demand etc. Taxpayers have an obligation to respond to HMRC on time, and in proscribed formats, without HMRC having any enforecable obligation to deal with taxpayers and their reasonable requests.

And until that imbalance is adjusted, HMRC will not command the respect that it should have, and frankly needs, to function correctly in a democractic society.


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What to do when you need HMRC

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The straight answer is probably “throw your hands in the air, swear if you must, and then give up”.

It has long been the case that getting a reply to written correspondence out of HMRC has been on a par with standing on one specific street corner waiting to see a car crash. And they don’t really ‘do’ e-mails despite a drive to on-line filing of just about everything. (On-line filing cuts down THEIR work, answering your needs doesn’t have the same priority.)

Now the complaints about the time it takes to get through on their ‘money-making’ phone lines has resurfaced after prominent media attention in both 2009 and 2011.

The average waiting time on HMRC's phone lines has risen to almost three times the length it was back in 2009. Over 25% of callers give up rather than hang on.Given that HMRC has admitted itself that it has sent out 12,000 incorrect penalty threats, and that their attitude to taxpayers owing them money is fierce, they can’t be surprised that people are ringing up to find out where they stand. But they have not apparently applied the resources to help those taxpayers.

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A sense of ownership

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There is much talk at the moment, in the media, of the ‘bonus culture’. In particular it’s being said that it’s wrong to pay large bonuses to a few individuals when the majority don’t share in the distributions. It’s also said that it’s wrong to pay bonuses to those who haven’t added value to their companies; indeed in many cases paying bonuses to those who drove them to the wall. The banking crisis highlighted these cases, but it’s a phenomenon not restricted to banking.

What doesn’t seem to be getting as much air-time, column inches or webspace is the lack of sense of ownership which actually underpins this phenomenon. If that could be robustly addressed much of this issue could be reversed.

In essence, what is lacking is a sense of ownership of the companies that executives work for. Headhunted to take executive positions, many senior people take the job with no other sense of involvement than their remuneration package. What is my salary? Pension? Benefits? And bonus of course. And what do I have to do to earn all that? Well.......just be there. Succeed? Well, that would be nice but if I don’t succeed so what – I get my package anyway.

Perhaps the clearest feature of this phenomenon is that when taking a job it is now a feature of the initial interviews and discussions to negotiate the EXIT package. When the time comes what will I get as a Golden Goodbye? As my pension? How many years’ salary do I get when I walk away? And ensuring that that exit package is contractual whatever disaster the executive might cause in his time at the company.

It’s not popular to talk about returning to the values of the Victorian Mill owners  - there was great exploitation, greed, and the Victorian times were great to live in for only a very few. But one image might be worth preserving; those Mills, and most businesses of the time, were family businesses. Whether your family flourished and thrived depended on running the business successfully. It was – literally – your money and you protected it with effort, application and drive. There was no exit strategy because there was no exit.

Families do, for the most part, run global businesses anymore and ‘gun for hire’ executives are probably here to stay. But we need to encourage and reward a culture of ‘sense of ownership’, we need to explore reward packages that force executives to fight for their survival depending on results. Indeed, perhaps punish – financially for the most part – lack of application and effort and success.

We need to make the rewards worth fighting for, and not a right given for just occupying a chair.

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A corrupt Inland Revenue

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Every self employed person in the country, and perhaps even moreso those who have been forced to pay additional taxes (some fairly, some unfairly) after HMRC investigations should be outraged at the revelation that HMRC have been cosying up to large companies and agreeing unnecessarily low tax payments in settlement of enquiries.

But they should be even more outraged that HMRC apparently refused to give information to Parliament - remember them? they're the elected officials we put in place to act on our behalf - when asked although it was made clear they had no legal power to refuse.

An unaccountable, undemocratic, oligarchy. Who'd have thought it?

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