Tax evasion “snitch”-line success?

A telephone “hotline” set up by the taxman to allow members of the public to report their suspicions of tax fraud to HMRC got about 300 calls every working day in 2011, according to a report by Vanessa Houlder in today’s Financial Times.

In the last five years the Her Majesty’s Revenue & Customs tax evasion hotline has received 412,000 calls about alleged tax dodgers: 74,000 last year alone.

However, the quality of the information HMRC gets is patchy.  Just as in Stalin’s Russia, many informers are clearly malicious, mis-informed, or just plain wrong in their suspicions.  HMRC haven’t given any details of how much this operation costs, and while the taxman clearly enjoys creating a climate of fear and mistrust amongst the self-employed, in terms of return on investment this may not be the best spend.  Original HMRC estimates were that an extra £32.5m tax would be collected as the result of the hotline.  But a National Audit Office said that the annual figure was closer to £2.5m – i.e. £35 a call.  And of course, the operation of the telephone hotline is only the tip of the iceberg of the costs.  This extra tax is only brought in at the end of the subsequent tax investigation.

The NAO report also said that most of the calls that brought in extra money were about “ghosts” (people who simply don’t tell the taxman they have started self-employment), and “moonlighters” (people in employment who do a bit of casual work “on the side”): and who tend to owe relatively small amounts of back tax.

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