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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  • Comment number 391.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 390.

    374 The countries bust mate & their are 2 groups of people sending it bust and it not ordinary working Joe public it's tax avoiding greedy bankers celebs & something for nothing take of the state give nothing back types the average person has had enough of both & what I suggest wil happen by public will so the right & left have wise up we are fed up with both your tired old political dogmas.

  • rate this
    0

    Comment number 389.

    Ministers, from all countries created the tax rules, companies are simply following these rules.
    In the UK the person filing the tax return has to provide details of any tax schemes used to HMRC and only once HMRC has verified the scheme can it be used.
    Once again we have financialy incompetent ministers/officials from all Govs creating rules, the consequences of which they dont understand.

  • rate this
    +1

    Comment number 388.

    Interesting to see yet again that Margaret Hodge is leading the calls for naming and shaming.

    Here's a company: Stemcor.

    Her family own it.
    They paid 0.01% tax on their UK revenues in 2011.
    Perhaps she should start her campaign close to home?

  • rate this
    0

    Comment number 387.

    Close the loopholes and sort the problem! If they weren't there people couldn't use them and the problem would be solved, simple!

  • rate this
    +1

    Comment number 386.

    How many times has this rubbish been spouted now? It has not happened yet and it is not likely to happen in the future. This is just a group spouting what people want to hear.

  • rate this
    +2

    Comment number 385.

    189. Leo

    It depends on the tax free allowance and the flat rate %.

    With a tax free allowance of £10k, no NI, and flat rate income tax of, say, 30%, the more you earn the more you pay and the low paid don't pay any income tax.

    The % can't be that difficult to work out, surely.

    Unfortunately, there is an army of lawyers, accountants and banksters who live off ever more complex tax rules.

  • rate this
    -1

    Comment number 384.

    The revenue has to come from somewhere, if a corporation avoids paying a couple of million that has to come from the pockets of everyone not making enough money as it is! Are all these apologists happy paying the tax bills of wealthy people who decide they just don't want to pay their share? Because that's what you're doing. If you support avoidance, you are paying their tax bills for them.

  • Comment number 383.

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

  • rate this
    +3

    Comment number 382.

    are these the same MPs that stole their expenses. in particular an MP who shall remain nameless ( i'd love to name him but the message would be removed) who after being suspended from the house of commons is now a minister. corruption of the highest degree!!!!

  • rate this
    0

    Comment number 381.

    #359
    They do not gain from society any more than the poor. The difference is hard work, talent and effort.
    Forcing them to pay more for services they use at the same rate or less than others is tyranny if they have no say in the matter (or very little say).

  • rate this
    +2

    Comment number 380.

    HMRC = Hedonistic Muppets Run Country

  • rate this
    0

    Comment number 379.

    This comment was removed because the moderators found it was off narrative. Explain.

  • rate this
    +1

    Comment number 378.

    299. Reader135

    Take two people. 1 earns 16kpa, the other 60kpa. How much as a percentage of their total income do they have to spend for the basics of living? Therefore, how much, relatively-speaking, does a flat-rate tax system penalise each? Equally, or disparately?

  • rate this
    +2

    Comment number 377.

    History tells us,that if you pay 3,4,5,6,etc X the salary to top accountants,lawyers,and other specialists that are also brighter,more ruthless,and willing to work all hours and days to deliver a tax saving for their clients,they will always succeed,Gov's are simply chasing shadows that have long since moved their assets.
    And the relative $costs£ involved for these people is a mere bagatelle!

  • rate this
    0

    Comment number 376.

    @369.pique

    Woowee!!!

    Going for a max on the negatives?

  • rate this
    +3

    Comment number 375.

    HMRC lol - they are a shambles.

    Last November I was chased for £200 that I apparently owe for PAYE - the person calling is only a chaser had no info at all about why I owed the money - asked for details - still waiting.

    Have £500 owed to me from a P11D overpayment over 12 months ago - can I even get HMRC to respond to my letters - no.

    They are useless useless useless and are getting worse.

  • rate this
    0

    Comment number 374.

    Modharry @368
    So in 6 months time 2.49 million people start to roam the streets looking for food.
    Hope I don't live in your area.

  • rate this
    0

    Comment number 373.

    They are 'spot on'......the sooner the better.
    I'd like to see more 'naming & shaming ' in this country .....it'll keep the crooks on their toes.

  • rate this
    +2

    Comment number 372.

    339. Strider
    3 MINUTES AGO

    Spot on.
    The way the unemployed are being demonised is a disgrace. People need to realise that its more likely for them to be on the dole queue tomorrow than them having the oppurtunity to scurry off to the channel islands with their new gained wealth.
    Good luck.

 

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