HMRC TAX RESEARCH AGENDA Nick Catton Knowledge Analysis

HMRC TAX RESEARCH AGENDA Nick Catton Knowledge, Analysis & Intelligence (KAI)

Structure of Talk • Recap David Ulph’s talk 12 months ago • Developments since then • Our research needs • Process, including funding for academics • Data - access, coverage, legalities • Conclusions

Recap: context of external research in HMRC • Single analysis unit to serve both Treasury and Revenue & Customs • Forecasting tax receipts, costing and analysing tax options in support of ministers’ fiscal, economic, social and environmental objectives • Supporting PSA targets (compliance, customer experience, frontiers) – efficiency agenda, performance measurement • Management of HMRC’s research programme

HMRC External Research Programme • • Supported for 5 years All aspects of HMRC’s work - from policy partnership through to tax administration, compliance and customer experience – Tax policy development and evaluation: definitions of R&D for tax credits, awareness of capital allowances for ICT investment, company car tax reform, climate change levy, R&D tax credits – Strategic: developing modelling / analytical capacity (eg savings & general equilibrium models); funding of academics

HMRC External Research Programme 2 • Strategic compliance: developing measures of tax gaps on alcohol & tobacco & cross-border shopping • Risk: quantifying VAT deterrent effects, modelling risk • Customer experience: Customer Service Survey, evaluation of short SA return pilot, employers’ experience of student loans collection • Performance: SA filing & payment behaviour, attitudes to tax debt & enforcement, surveys of e-filers vs paper filers

Recent developments and plans …. • • • Research conference Strengthening capacity for strategic analysis and modelling External advisory panel Forward look at research needs Interface for researchers & access to funding Data availability – Stats Commission review

Research Conference Aims • Helping us to learn what academics are doing in related areas and so benchmarking our research against best practice • Encouraging the interchange of ideas between our specialists and outside academics • Encourage interest in the whole area of taxation research so that our analysis, policy making, and implementation can be based on a much larger body of work • Validating and improving quality of our research, particularly methodology

Plans for developing analytical capacity: Strategic Analysis, Modelling & Research • • • Expanded & higher profile function, with dedicated senior leadership • Doing more: “Supporting infrastructure for first class analysis” Already includes research coordination, evaluation guidance, general equilibrium model, cross-cutting analysis – Pro-active engagement with academia, other fiscs & multinational institutions Ø to bring in best practice methodologies & support our own analysis – Quality assurance across our work – Secretariat for new external advisory group

External Advisory Panel • • Still embryonic Half-dozen leading academics – economists & other social sciences • • Quality assurance for our internal analysis Bring into HMRC latest academic work Advise on methodologies, eg sampling frames, econometrics Contribute think-pieces, empirical work etc

Strategic look at HMRC research needs: 1. Compliance • Tax Gap: expand improve measure of the gap between theoretical liability and actual receipts • Behaviours: understand attitudes to compliance & impact on tax gap – impact of HMRC interventions – how different types of non-compliance interact • • Evaluate compliance interventions - direct & indirect effects Tax planning schemes: better understanding of the market for tax planning advice

Strategic look at HMRC research needs: 2. Customers & compliance costs • Deregulation & compliance costs: – understand the relationship between compliance costs and other HMRC objectives – measure change in compliance costs over time / in response to HMRC actions • Increased HMRC focus on understanding customer behaviour: – knowledge of customers’ attitudes – explore and measure customer perception & experience – evaluate HMRC guidance, operational changes etc

Strategic look at HMRC research needs: 3. Operations • Operational Efficiency: – what impact do long-term trends have? eg social demographics, technology • Tax credits: – understand link with other incentives to work & childcare – evaluate operational / procedural pilots & marketing initiatives • Debt: – how do people view HMRC debts? – how does HMRC debt change over time?

Strategic look at HMRC research needs: 4. Policy-partnership • Support policy development, for example: – What is the effect of tax & benefit system on incentives to work, save & invest – How does the tax system for large business impact on crossborder location decisions • Policy evaluation: learn lessons & improve policy-making

Process: Internal vs external research? • Case-by-case judgement • Data availability - often need survey data • Expertise - in particular econometric modelling – now employing an academic econometrician as a consultant • Resources - constraints both on internal analysts & budget for external research • Consider case for research being independent of government

Process 2: Involving academics • Communicating our research needs (eg today), stimulate interest • Establish procedures for academics to propose research – Funding available in principle, but must be in competition with internally generated research proposals • Access to administrative data – available in theory to researchers under contract to HMRC, subject to usual criminal sanctions • Participation in research steering groups & peer review

Process 3: Making data available • Potential to fill gaps in evidence base by facilitating external research • Extensive aggregate data published, & Survey of Personal Incomes lodged in Essex data archive • Admin data is based on liabilities, receipts & tax bases for all taxes – ie micro data behind HMRC’s published National Statistics – see www. hmrc. gov. uk/stats • Legal position permits researcher access to micro data when it is on behalf of HMRC (ie in pursuance of HMRC’s functions), subject to criminal sanctions as per HMRC staff • Statistics Commission reviewing data published and external users’ views on data access

Conclusions: working together • Share our research needs • Access to funding &, where appropriate, data • Formal & informal advice & scrutiny • Build capacity within & outside govt “Government has to be able to communicate its needs and priorities clearly to the academic sector if the research agenda in academia is to reflect its requirements” (Adding It Up Report: Improving Modelling & Analysis in Central Govt , 2000)