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Is the cavalry coming?
April 2008
Mike Hodge, International Trade Today
For those who need reminding, it is now some three years since Customs & Excise merged with the Inland Revenue to make HM Revenue & Customs (HMRC). I was one of those who needed reminding when the merger took place – it seems, almost, like yesterday. At that stage David Varney (later Sir David) was appointed as executive chairman of the merged department. The Customs Practitioners’ Group (CPG) was very fortunate to get him to speak at one of our meetings about the future direction of the merged department and, more importantly, what was going to happen to the international trade side of HMRC.
A merger made a lot of sense from the point of view of economies of scale and a serious reduction in head count but the world of international trade is a very specialised area and the CPG was concerned that this might be given the ‘backwater treatment’ as there appeared to be a distinct lack of interest in this particular part of the business by HMRC.
In the past, the old Customs & Excise saw itself as a revenue protecting agency and the staff saw themselves in a role whereby they were allowed, and expected, to give helpful advice to companies that would assist them to be competitive in world markets.
The introduction of VAT in the early 1970s changed the emphasis of the departmental ethos and I well remember running a week’s duty relief training course in Southend in 1984 for officers moving into the area of international trade advice.
Some of the class had transferred across from VAT control work and, about half-way through the week, having covered some of the duty relief opportunities, I was asked by a student, ‘Excuse me, but can I just get this clear in my own mind – are you telling us that we are meant to be advising companies how to avoid paying duties?’Yes! That was absolutely the question and it demonstrated only too well to me that the mentality was changing.
So, in November 2006, Sir David and the then head of Customs (Kevin Franklin) came to address the CPG. It was explained to us that there was a lot to do, a lot to achieve, bridges to cross, systems to change but there was a guarantee given that the international trade business side of the new department would be as strong and as efficient as ever. I am afraid to say that none of us thought this would be the case and our concerns have subsequently been realised.
The problem, to my mind, is entirely due to the complete lack of understanding by the top management of HMRC. The collection of tax is not just about the collection of the most amount of revenue for the least amount of effort. Neither is it about collecting 80 per cent of the revenue due from 20 per cent of the tax-paying base. It’s about fairness and equality; it’s about paying companies a refund when they are legitimately due a refund. And it’s about providing help, assistance and guidance to those companies that require that help.
Over the last three or four years, regular readers of my column will know that I have harped on interminably about what I consider to be the shortcomings of HMRC when it comes to providing constructive help for ‘UK Plc’. It is probably true to say that, in the UK, companies have been much better provided for than if they operated in another EU member state. And whilst that’s as may be, it doesn’t mean that HMRC can now decide that none of this is worth bothering about. The Department has, in my view, a duty of care to UK companies trying to obtain a legitimate saving in duty costs.
Now, it may possibly be that there is a light at the end of this very dark tunnel. The National Audit Office (NAO) is in the process of conducting a study into HMRC’s role in educating international trade businesses to comply with their obligations and enforcing compliance. The report is due to be published in June and the NAO will have spent the best part of a year talking to businesses, running workshops and discussing issues with HMRC.
For those who need re-assurance that this report will not be yet another whitewash, the NAO is totally independent of government. The NAO has a statutory authority to report to Parliament on the economy, efficiency and effectiveness with which government departments have used their resources. This, effectively, is a value-for-money study on international trade and, as well as working with various Trade Associations, the NAO organised an all-day workshop at the end of 2007.
I attended the workshop along with another 20 or so others representing the complete spectrum from companies, consultants and trade associations. The day was really interesting and thought provoking in that the folk from the trade were all singing, in unison and in harmony, from the same hymn sheet. I think the NAO staff were quite taken aback by the strength of unity – they had heard similar views from individuals they had spoken with before the workshop. But this was a much more concerted view.
The NAO study itself is looking at the advice and guidance that HMRC supplies to importers and exporters and what additional help could be given to reduce administrative burdens, ease of exchange of information and facilitate the overall movement of goods.
The study is also covering HMRC’s enforcement and compliance performance through activities including border control, inland assurance and risk assessment. The workshop was run to look at the three key areas of:
1) Education – what does HMRC do to help the Trade follow the correct procedures?
2) Customer burdens – what are the key ones?
3) International trade processes – how easy is it to use the various international trade processes where traders have contact with HMRC.
Of course, the output from the workshop provided much more information than the NAO team expected! It is not my job to steal the NAO’s thunder but, having seen the summary of the day’s findings, I am really looking forward to seeing the NAO report when it is published in a couple of months time.
As you can well imagine, I shall be returning to this subject with increased motivation! Once the NAO has reported, HMRC has to act on the recommendations and findings. The report has to be taken seriously and maybe international trade will find itself out of the muddy backwater.
For a change, I am optimistic.
