Tax avoiders should be named and shamed, says watchdog

 
A man views a tax return form A spending watchdog says the taxman is losing the "game of cat and mouse" with tax avoidance firms

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Tax avoiders should be "named and shamed" to discourage people from using legal loopholes to avoid paying their fair share, a spending watchdog says.

The Commons public accounts committee said HM Revenue and Customs (HMRC) lost out on £5bn a year and tax avoidance firms were "running rings" around it.

HMRC said it had a "good track record" of defeating such schemes.

Meanwhile, Labour leader Ed Miliband says firms in the UK should publish the amount of tax they pay in the country.

Mr Miliband has already called for greater transparency in corporate tax bills, but speaking during a visit to Scandinavia, he said if international action failed to deliver a change in corporate behaviour, the government should take action at home.

'Boutique' schemes

The House of Commons Public Accounts Committee (PAC) report warned the taxman was losing the "game of cat and mouse" to clients and promoters of tax avoidance schemes as they deliberately took advantage of the time it takes HMRC to shut such schemes down.

HMRC must start publicly listing promoters and those who use their schemes, the committee said.

Jim Harra, director general of business tax at HMRC, says it is "well aware" of schemes and "who is promoting and using them".

Last year comedian Jimmy Carr said he had made a "terrible error of judgement" after it emerged that he had used a complex scheme to reduce his tax bill. The K2 tax-avoidance scheme Carr is said to have used enabled members to pay income tax rates as low as 1%.

Labour MP Margaret Hodge, who chairs the PAC, said: "Promoters of 'boutique' tax avoidance schemes, like the one brought to our attention by the case of Jimmy Carr, are running rings around HMRC.

"They create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those intended to encourage investment in British films, and then sign up as many clients as possible, knowing that it will take time for HMRC to change the law and shut the scheme down."

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants, says naming and shaming is a dangerous game to play.

"Where do you draw the line?" he said.

"There isn't a clear cliff edge between what you could say is acceptable tax planning and what is unacceptable tax avoidance. I think there's some difficulty in terms of where do you pitch it in terms of where you name and shame."

Tax rules mean promoters must notify HMRC of new avoidance schemes, which has led to the swift closure of some, according to the PAC's report.

But it warned that officials did not know how many promoters were ignoring the requirement.

Mrs Hodge said: "We are also alarmed to hear that promoters are getting off paying fines for not disclosing their schemes by pleading that, in the opinion of a QC, they have a 'reasonable excuse' for non-disclosure. HMRC is right to explore how to make it more difficult for this tactic to work.

"The number of cases HMRC takes to court is tiny compared to the overall caseload. It must make use of the additional resources it has been given to act much more urgently to investigate and close down new schemes and to bring more cases to court."

'Small hardcore'

Jim Harra, director general of business tax at HMRC, said it had a "good track record" of defeating tax avoidance schemes.

Jimmy Carr Jimmy Carr was widely criticised last year for taking part in a tax avoidance scheme

"There is a small hardcore of firms who are persisting in selling schemes which are of increasing poor quality to the public and we are making all the efforts we can to steer people away from these dubious schemes," he told the BBC.

He said the £5bn in income mentioned in the report represented 1% of all the tax HMRC collected every year, and it won 85% of all the tax avoidance cases it took to court.

Mr Harra also said HMRC already named avoidance schemes that had failed and the promoters who had pushed them.

A recent meeting of finance ministers of the G20 group of nations in Moscow pledged to crack down on tax avoidance by multinational companies.

The move, led by the UK, France and Germany, could see the development of measures to stop firms shifting profits from a home country to pay less tax elsewhere.

 

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  • rate this
    +1

    Comment number 371.

    This is rediculous. How about rather than naming and shaming people into paying tax by the spirit of the law, they concentrate on fixing the laws that allow them to avoid tax in the first place!!

    What happened to individual's tax matters being private? Well yes, but only if it gets us votes.

    The only benefit would be a further embarrasment of MPs if it turned out they had been dodging too!

  • rate this
    -3

    Comment number 370.

    352 Tripod

    Wow are you going to get down arrowed for that. It is a sign of what a sick and broken land this is, as the Socialist will not view the 20 k in benefits only that the 50 k in tax should be more. ! Thatcher was right the left only look at the gap. they want everyone poor as long as the gap is closed. Of course this in most cases excludes the left elite who will ensure they don't pay.

  • rate this
    +1

    Comment number 369.

    you could name me and shame me all you want, if its not illegal, i wouldnt care less.

    If i was Jimmy Carr i wouldnt have stopped using that method, wouldve been proud of it.

  • rate this
    0

    Comment number 368.

    The answer to this is bring all the dependencies and territories fully into the UK tax structure a anomoly that needs closing & then shrink the welfare state by limiting out of work benefits to 6 months.I wil be voted down by the right on the former & the left on the latter but they are politico dogmas & always wrong.What Mr average wants should occur down with the super rich & benefit scroungers

  • rate this
    +1

    Comment number 367.

    Whats wrong avoiding tax ? It seems prudent to do so .

  • rate this
    0

    Comment number 366.

    as long as it's not illegal, then i don't see the problem. no one likes to pay tax, but the majority of us do because we know that it funds services.

    given the opportunity, most people would pay less tax if they were shown a legal loophole.

    if it's that big a problem, then close it using legislation, but i could see lots of people leaving as a result and taking their cash with them.

  • rate this
    +5

    Comment number 365.

    Those who avoid tax shouldn't be held responsible. Its the flawed system that is to blame.

    Transparency is necessary to draw focus to the inadequacies of the system.

  • rate this
    +2

    Comment number 364.

    I would have thought that the Government would be on dodgy ground "shaming" people who have not broken the law (avoidance is legal, evasion is not) - however "questionable" the moral grounds. What is to stop such people suing the Government for defamation of character or invasion of privacy, perhaps thereby gaining more money.

    Fix the Tax laws, deal with the problem not the symptoms.

  • Comment number 363.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 362.

    #346
    The banks shouldn't have been bailed out when they went to Gordon with their begging bowl.
    They would still pay moe tax ith a flat rate, just a fairer, more reasonable amount.
    If they value society so much that they feel they should make a larger contribution than the rest of us, they can give the difference to charity.

  • rate this
    0

    Comment number 361.

    'Declaring themselves shocked by their findings, the MPs today say this “staggeringly inappropriate” way of paying its staff - which means both the BBC and the employees can pay substantially less tax - must come to an end.'

  • rate this
    +1

    Comment number 360.

    If Labour politicians such as Margaret Hodge and Ed Miliband want to put a stop to tax avoidance they should simplify the tax code when they next come to power.

    But as they weren't very good at doing that the last time they were in Government, all they are doing is reminding the electorate how incompetent they really were.

  • rate this
    +3

    Comment number 359.

    "Bob Roberts
    It's called tyranny of the majority"

    It would be tyranny if laws that applied to some were not applied to others in a similar situation. The rich gain most from society (that's why it's possible to become and remain rich) and society has determined what services it provides in common and how to fund them. Avoiding legal obligations others must submit to is more like tyranny.

  • rate this
    +1

    Comment number 358.

    If you are honest,competent,and wish to do the right thing on behalf of ALL of the electorate,their is no correlation with these attributes and whether we are experiencing a recession,high growth, or an economically neutral environment.
    So our politicians concluded with their coffers unable to deliver in an increasing number of areas that would effect their own chances of electoral success to act

  • rate this
    +1

    Comment number 357.

    “Tax avoiders should be named and shamed, says watchdog”

    What a great idea, let’s run TV adverts and programs naming them individually and letting us all know how much they are costing the public. To get the ball rolling let’s start with our MP’s and members of the Government so that we all know who NOT to vote for come 2015.

  • rate this
    +3

    Comment number 356.

    @AndyC555
    Your talking nonsence, Why should Jimmy Carr or anyone be allowed to avoid income tax just because they agrees to spend their money in the UK? Think about what your saying, if instead of paying 50k income tax I bought stuff with the cash their is no way HMRC make back their 50K!
    how much would they get on a 1k TV? maybe £400 direct anf indirect.

  • rate this
    +3

    Comment number 355.

    338.Trout Mask Replica
    3 Minutes ago
    "In many industries it's called "being a professional" where one does what one needs to do to get the job done. Ironically 2 of the longest standing professions (Law and medicine) are renowned "clock watchers" being paid by the hour not for their performance.
    +++++++++++++++++++++++++++++++++++++++++++++
    They are not the mugs you like are they?

  • rate this
    +5

    Comment number 354.

    @291 Strider

    If you'd bothered to actually read what I said, it said 'work shy' not 'unemployed'. Big difference. One has never worked even though they could and fully intends never to and live off the state. One is unemployed through no fault of their own and would like to work if/when they can. Having been made redundant twice I can assure you I have nothing against the latter!

  • rate this
    +3

    Comment number 353.

    330. Quantum - Should everyone with an ISA be named-and-shamed for arranging their finances to reduce their tax liability?
    ______
    ISA money taxed (20-40% PAYE+NI) BEFORE it goes into an ISA. You don't pay 20% on the (negligible) interest. You may only put £5500 or so into an ISA per year. It is vehicle put in place by the Government to encourage you to save to shore up your pension.
    Bit different

  • rate this
    +3

    Comment number 352.

    Publish everyone's net tax contribution i.e. income tax less benefits, and then consider who should be more ashamed;
    The household minimising their tax bill to £50k per year or
    The household maximising their benefits claim to £20k per year?

 

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