Oliver Wright: These cynical tactics undermine our faith in the fairness of the tax system

It is unconscionable to withhold information from taxpayers who have forgotten to file returns
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The Independent Online

Even if Britain was not in the middle of an economic slump, the target set by George Osborne for HM Revenue and Customs to raise an extra £7bn in tax revenues by 2015 would appear ambitious.

To do so at the same time as cutting HMRC's budget by 15 per cent would appear impossible.

But a high-profile political target is not an easy thing for civil servants working in the Revenue to ignore. And the suspicion is growing that tax officials are increasingly turning to underhand and draconian fines to achieve this goal.

In some senses, from HMRC's perspective, it's just common sense. Why spend thousands of pounds on lengthy tax investigations which may not produce any additional revenue when you can rack up late payment fines and let human nature do the rest.

Whether you owe a certain amount of tax can be contested – if you have forgotten to do something under the Government's new system it can't. But what is really – in the words of the Tax Tribunal judge – unconscionable is for HMRC to deliberately withhold information from taxpayers who have forgotten to file their returns for months so they can make more money.

Cynically HMRC knows that few firms are likely to go to court over a £500 fine because the cost of getting representation (which can't be recovered even if they win) is likely to exceed the fine. So it's easy money and another £500 towards Mr Osborne's £7bn target.

But it does have consequences. It undermines faith in the fairness of the tax system, it damages the finances of small firms during the downturn when such sums are not insignificant and undermines the Government's pledge to support small businesses.

Fines can be legitimately used to change behaviour – but they should not become a tax in themselves.