Over at City AM, Allister Heath has an extremely troubling column about how the privacy and indeed freedom of all UK taxpayers may be affected by the post-cock-up fallout of the HMRC's latest pathetic tax blunder.
After disastrously miscalculating PAYE tax for millions of people, HMRC is apparently now lobbying for…
a gigantic power grab which could entirely redefine the relationship between the state, employees and their employers.
At present, PAYE income taxes are deducted by employers from their employees’ wages on a monthly basis. Under the most extreme of the proposals, companies would start handing over their entire salaries to the government, in the shape of a “central calculator” run by HMRC. The taxes would then be deducted by HMRC and the remaining amount would be paid by the taxman to employees. Incredibly, HMRC would suddenly become the largest payroll organisation in the world – it, rather than employers, would pay wages.
How do we hate this? Let us count the ways…
- Set-up costs: massive, with thousands of consultants, developers and others being hired; these IT projects are notoriously expensive, invariably go over budget and end up not working properly at all.
- Errors: massive numbers of errors would lead to money being paid over by employers but not reaching employees on the due day. The government's track record with large IT projects makes this a near-certainty. Imagine if 1m people suddenly didn’t receive their pay at the end of the month..
- Ongoing costs: HMRC would have to hire tens of thousands of staff – jobs
currently undertaken by payroll or HR departments in private firms –
merely to deal with queries, transferring these jobs from the private sector to the inefficient public sector – not only meaning we now all have to pay the wages of these people hitherto employed in the private sector, but making us all liable for their pensions to boot!
- More state control: the coalition is talks about decentralisation and localism. Centralising payroll in a government institution is an unbelievably absurd move in the opposite direction.
- Privacy – what privacy? Will everyone’s salary and taxation level be
available online, given that all of the data would suddenly be
in one place? Hackers would have a field day. It only needs to be lost once – and once it's lost, it's gone for good. Just ask the 25 million people whose personal details were on the child benefit database, lost in 2006.
But wait, that's not all! HMRC have an additional proposal: real-time information on pay so that tax more likely to be deducted correctly. As Heath points out,
There could be huge costs to employers, who would have to invest heavily in staff and computer systems.
The real danger, however, is that HMRC is also thinking of forcing firms to hand over extra information to the authorities as part of this shift to real-time data. This is unacceptable for cost and privacy reasons. The Institute of Directors has highlighted some of the issues. Is pay frequency really needed? How can employers be expected to know about all third-party payments, in real time? Does the fact that some pay is for holidays matter for tax purposes?
There is yet one more suggestion – that hours worked should be recorded by the state. This would be another odiously authoritarian development. It is almost as if officials are deliberately seeking to kill off corporate Britain and to impose Soviet-style controls on taxpayers.
All in all – a very bad performance today, from a very bad Department.
This plan is also well bashed by Jill Kirby of the CPS, over at Centre Right