HMRC 'loses nerve' chasing big firms, says MP
- 19 December 2013
- From the section Business
The UK tax authority "seems to lose its nerve" when chasing multinational companies for owed tax, the head of a committee of MPs has said.
Margaret Hodge, who chairs the Public Accounts Committee, said that the approach was firmer when HMRC was pursuing small businesses.
A report by the committee said HMRC failed to demonstrate it was on the side of people who paid tax in full.
But the tax authority said it strongly disputed the committee's conclusions.
"HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by Parliament," a spokesman for the tax authority said.
"[We] challenge the committee's selective and misleading use of figures."
'Striking a balance'
The committee said that HMRC failed to use the full range of sanctions at its disposal to vigorously pursue all unpaid tax.
It said it should pursue prosecutions to test the boundaries of the law, the committee said, and had yet to test how existing tax law impacted on global internet-based companies.
"The lack of prosecutions against multinational corporations seems at odds with HMRC's stance on pursuing tax debt from small and medium-sized businesses in the UK," the committee said.
Ms Hodge said: "HMRC aims to make the UK more attractive to business but the incentives to international corporations may also enable them to avoid tax.
"Changes in the controlled foreign company rules and the failure to close the loophole created by Eurobonds are two examples showing where it has become easier for companies to avoid tax while ordinary people continue to pay their share.
"If that is HMRC's real intent, then it should be open about it. When designing the tax regime for businesses, HMRC needs to strike the right balance between support and enforcement."
But a spokesman for the tax authority said more than £50bn of additional tax had been collected since 2010, including £23bn from large businesses.
"We have carried out 2,345 prosecutions for tax evasion in the last three years, including of high-profile accountants and lawyers, have halved the number of disclosed tax avoidance schemes and have protected more than £2.4bn from marketed tax avoidance schemes this year alone," he said.
The committee said that the tax authority should gather more intelligence about how much money was lost to tax avoidance.
HMRC also "massively over-estimated" how much it could collect from UK holders of Swiss bank accounts, it concluded, and should do more to get hold of these funds.
The 2012 Autumn Statement estimated that £3.12bn in unpaid tax would be recovered from these accounts in 2013-14, but only £440m had been collected so far.
Emma Seery, of the charity Oxfam, said: "It is an outrage that HMRC have collected less than 15% of the tax it was supposed to from Swiss bank account holders.
"Despite strong rhetoric from the government promising a crackdown on tax dodging, these figures show it is still falling well short of getting the richest people to pay their fair share. This massive hole in the country's tax revenue could go a long way to help rescue millions of British people from the poverty trap."
But Chas Roy-Chowdhury, head of taxation at the accountancy body, the ACCA, said: "It is easy to point the finger at HMRC and tell it to try harder. However, HMRC is facing a squeezed budget, like so many other public sector bodies.
"While large corporations have the latitude to legally avoid tax, the public mood considers this practice unethical and inappropriate.
"However, it is up to government to clarify the rules and close any existing loopholes. HMRC is trying to fulfil their existing remit - to collect taxes.
"Blaming HMRC for not closing loopholes that benefit multinationals that exist in law suggests a misunderstanding of how the tax system works."