HM Revenue and Customs has made "little or no progress" since its last round of criticism from the Public Accounts Committee, the group of MPs says today.
In its latest report, PAC lays into the tax authority, saying it has failed to improve the way it reports on the amount of money it raises through compliance work; questioned its handling of aggressive tax avoidance schemes; and says HMRC is "still failing to provide an acceptable service" to customers.
HMRC has said it is "disappointed" with the focus of the committee's report, which it says has "overlooked" its recent achievements.
The committee acknowledges that HMRC has managed to significantly increase total tax revenue in each of the past five years, with tax take up by £11.9bn between 2013-14 and 2014-15. The tax authority has also slashed its running costs from £3.4bn to £3.1bn over the five-year period.
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And PAC accepts that HMRC has also curbed both tax losses and outstanding tax while paying out more in tax credits and benefits.
But MPs raise a number of concerns over HMRC's work, with PAC chair Meg Hillier saying taxpayers "expect and deserve better".
The committee continues to make the case for HMRC to include aggressive tax planning – schemes within the letter of the law, if not abiding by its spirit – in its estimate of the tax gap. The gap measures the difference between the amount of tax due to the exchequer and the amount actually collected in a given year, and figures published by the tax authority last month show that the gap had narrowed by 0.2% year-on-year.
However, PAC says the taxman should "identify and report the value of all tax avoidance schemes", including those HMRC has challenged but which have later been deemed legal by the courts, when calculating the tax gap.
And the MPs renew a call – made in a PAC report published towards the end of the last parliament – for a detailed breakdown of all tax reliefs currently in operation.
"HMRC should define the different types of tax relief, including those it considers to be tax expenditures," the committee says. "It should identify which reliefs it considers require monitoring and evaluation and publish this information to enable parliament to decide which reliefs may require further scrutiny or legislative change."
HMRC estimates that its compliance work – cracking down on people who fail to meet their tax liabilities – saved £26.6bn last year, and the tax authority received a £800m boost in chancellor George Osborne's summer Budget, aimed specifically at improving this area of its operations.
However, the committee says the tax authority's reporting of how much it has raised through improved compliance work "remains unnecessarily complicated and confusing".
"Most readers of HMRC's annual report would assume that the type of compliance yield it calls 'cash collected' is cash actually received, but even this is not the case," the report says.
"'Cash collected' includes cash not yet received, not all of which will be collected. In addition, HMRC's approach of counting revenue it expects to collect in future years in this year's compliance figures is questionable and may well mislead people into believing that HMRC has recovered more tax than it really has".
"Deeply disappointed"
Some of the committee's most strident criticism is reserved for HMRC's customer service record.
PAC points out that HMRC responded to "just" 72.5% of calls in 2014-15, a level of service it warns could have an "adverse impact on the collection of tax revenues" – and says current HMRC performance measures "do not cover delivering a consistent level of customer service throughout the year".
The report says: "HMRC has consistently refused to set more demanding targets, however, and in 2014-15 it answered only 39% of call within five minutes. HMRC did not provide us with any indication of when or by how much its customer service would improve, beyond a vague aim to improve year on year."
Hillier said she was also "deeply disappointed" that HMRC had not done enough to pursue tax evaders.
"We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public," the committee chair said. "It's also important that the majority who play by the rules, paying their tax on time and in full, see that those who don't will face the consequences."
"Overlooked"
The tax authority has pushed back against the committee's findings however, saying PAC has "overlooked HMRC's record results" in increasing tax take and narrowing the tax gap.
An HMRC spokesperson added: “We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year and we had recruited around 3,000 new staff to improve service levels. But these customer service issues did not affect our ability to collect tax.
“Last year, we secured £26 billion of additional yield across all our compliance work, ensuring everyone pays what they owe. Tackling tax evasion is a top priority for HMRC and last year alone we successfully prosecuted a record 1,200 cases, resulting in 407 years of custodial sentences.
"We also routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action. We brought in more than £1bn from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers."
The PCS union said the report's findings showed that detailed review of HMRC's resources was "long overdue".
"It has been abundantly clear for years that the department has cut too many staff and that services are suffering," said the union's general secretary Mark Serwotka.
"The department needs major investment backed by a real political commitment to tackle tax evasion and avoidance as an alternative to more damaging spending cuts."
Last week, ARC – the branch of the FDA union representing senior tax officials – welcomed the narrowing of the tax gap but similarly argued that HMRC "could deliver wider compliance and also better customer service if it had more resources".
The tax authority's headcount has fallen from 96,000 in 2005 to under 60,000 by 2014, with the number of full-time equivalents working for HMRC set to fall further to 52,000 by April next year.
A separate assessment of HMRC by the National Audit Office – published at the start of the year – was more positive about the tax authority's record, saying it had "accepted and implemented" two thirds of PAC's recommendations since 2010, and accepted "all but one" of the NAO's 137 recommendations.