The claim

“What we have done is put an extra £900m specifically into the Inland Revenue to try and make sure that we do properly get companies and individuals to pay their taxes.”factFiction4 FactCheck: Are the PMs tax claims avoidance or evasion?

Prime Minister David Cameron, Prime Ministers’ Questions, 21 November 2012

The background

It wasn’t long before that tricky tax question came up at Prime Ministers’ Questions today.

Tom Harris, MP for Glasgow South, asked David Cameron how it was that a local comic store, Red Hot Comics, employed 7 people and paid “every penny of tax on time”, whereas its main competitor, Amazon UK, brought in revenues of £4.5bn yet paid less than £1m in tax last year.

The Prime Minister didn’t disagree that companies need to pay their fair share in taxes. Which is why, he said, his government had “put in an extra £900m specifically into the Inland Revenue to try and make sure that we do properly get companies and individuals to pay their taxes”.

It’s obviously a serious issue – not only do people who pay their taxes resent doing so when there are individuals and companies who don’t, at great cost to the public purse, but in these times of austerity, every penny counts.

FactCheck looked into how much the government really has devoted to the taxing question.

The analysis

We asked Number 10 for clarification on what the Prime Minister meant.

“We are already reinvesting over £900m in HMRC to bring in around £7bn each year by 2014-15 in additional tax,” came the reply.

It’s worth noting that when pressed, Number 10 said they were “reinvesting”, not “investing”. That would suggest that the money is coming from the HMRC itself.

Indeed, if we take a look at the 2010 Spending Review, which outlined the cuts, it says as much. It said that from April 2011 to April 2015, HMRC would have to reduce its overall spending of £3.7bn by 25 per cent.

Of those savings, “ministers have agreed to reinvest £900m over the four years to combat tax avoidance, evasion and fraud”.

In other words, they’re being asked to implement budget cuts, and of those cuts, some of the money would be given back.

It still meant that even after the £900m was “reinvested”, the net effect was a reduction in the budget of 15 per cent.

The HMRC website went on to say that the £900m would create around 2,500 additional jobs within HMRC’s Enforcement and Compliance area by 2015.

Enforcement and Compliance was the subject of a National Audit Office report earlier this year, so we had a look at that too.

That showed that in 2008, it was forecast to deliver £4.56bn, but by last year, had only delivered £4.32bn.

It also showed that the programme had cut staff by 3,387 by 2008-2009. HMRC estimated that the result of the staff cuts was a drop in the amount collected by Enforcement and Compliance of around £1.1bn gross.

The verdict

It’s disingenuous of Mr Cameron to attempt to claim the government has “put in £900m extra”, when in practical terms, it’s just taken a bit less away.

When we asked the HMRC to explain the give and take in their budgets, they admitted that it was actually “recycled” money.

“Over the course of the Spending Review, HMRC will make savings to reduce spending by 25 per cent in real terms. £900m of those savings will then be recycled into additional work against avoidance, evasion and criminal attack,” the department said.

And when we look at the programme that money has been “reinvested” into, Enforcement and Compliance, it’s worth noting that it’s been hampered by staff cuts (we’ve FactChecked staff cuts before).

Not outright truth evasion, but probably more like truth avoidance on this one.

By Fariha Karim

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