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

    Comment number 891.

    Should we name and shame ten minute rule abusers"

    Sure but it's easy to circumvent. Start two different browers (eg Chrome and IE) or run 2 different PCs.

    "882. Bastiat"

    What's your alternative to democracy, admittedly the worst possible system of government apart from all the alternatives that have been tried? How would your alternative obtain the consent of the governed?

  • Comment number 890.

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

  • rate this

    Comment number 889.

    882 that post shows your total lack of understanding of economic matters are you George Osbourne

  • rate this

    Comment number 888.

    2 Hours ago
    If everyone paid a morally fair rate of tax, the tax rate for the rest of us would go down.

    I don't think it would

    They would just find more rubbish to waste it on

    Blair was overflowing with tax when he brought in the 'tax upfront' payment on the self employed..(yes, self employed pay tax on income BEFORE they earn it) ...result..hundreds of quangos

  • rate this

    Comment number 887.

    Instead of naming & shaming, shouldn’t the Gov’ be doing its job & plug the loop holes?
    Of course this isn’t going to happen because they are abusing the loop holes themselves (including you Labour).
    Trebles all round.

  • rate this

    Comment number 886.

    @Some Lingering Fog

    "Tax this, tax that, tax everything. No wonder people try and avoid paying."

    Indeed and I see it as my moral duty to fight government tyranny by pro-actively encouraging as much Tax Avoidance as I possibly can by giving tips such as:

    1. Go self-employed and claim for as many expenses as you possibly can.

    2. Always demand to be paid in cash.

    3. Always shop at Amazon, etc.

  • rate this

    Comment number 885.

    when tax dodgers are the ones making the rules, why should things be any different?

  • rate this

    Comment number 884.

    On this basis I suggest that the Dept. of Transport should be encouraged to "name and shame" all those caught doing 29mph in a 30mph zone.

  • Comment number 883.

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

  • rate this

    Comment number 882.

    Taxation = Destruction

    "A democracy... can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy."

  • rate this

    Comment number 881.

    'Simple fix;
    If turnover is >X then minimum tax = Y'

    I'm all for simplicity but that's utter tripe - Some companies work on high turnover/very low profit margins others on low turnover/very high profit margins but your 'simple' fix is to tax them based on turnover alone?
    Still some numpties voted you up - you'll probably get an editors pick as well just to compound the matter.

  • rate this

    Comment number 880.

    To those waffling on about paying a low salary and dividends, the government closed that loophole back in 2002 (look up IR35), one of many boots the Labour government laid into the IT sector and other contractors who risk more as they don;t get paid when they are off ill etc.

  • rate this

    Comment number 879.

    867 Bastiat
    typical to only give one side of the argument,history shows that when some people believe they are more important than they are then economic activity always slows down,even if a small boost happens at the begin,just has if everyone achievements were calculated having the same importance would,communism fell because of the later,Capitalism always plays brinkmanship with the first

  • rate this

    Comment number 878.

    @867 Bastiat "If all of these have ended up in where we are today... why do we think more of the same will work now?"

    Where we've ended up today is one of the richest countries on the planet with great health, life-expectancy and quality of life, better than ever before in history.

    Where's your case study to show how your ideal society performs?

  • rate this

    Comment number 877.

    self employed should be targeted, especially new romanians coming over and doing tax evasion etc etc

  • rate this

    Comment number 876.

    Naming and shaming of tax avoiding corporations is fine by me.

    I'm not too sure about a public witch-hunt on individuals.

    Yes, fine them (good and hard) and make sure they pay the correct tax going forward, but I'm not conviced about the real motives of the Commons public accounts committee in calling for this....

  • rate this

    Comment number 875.

    These are international companies who have arranged their bookkeeping in such a way that they pay tax to countries that charge less tax than here. As well as there being these loopholes, does it not also show that a lower tax rate encourages more business, more business = more tax payers? These companies have avoided UK tax, but have paid tax elsewhere. We need to make the "elsewhere" here!

  • rate this

    Comment number 874.

    863 - Brangy
    No, no. As things are going now with digitisation of information, including books; online banking and online tax returns?You reach a point where you can't read a book of paper in your own home, but have to rely on one provided on the internet and the purchase tracked? No, Brangy let's not go there.

  • rate this

    Comment number 873.

    Let's have a global agreement that investment banks and big corporations pay all our tax out of their obscene profits and the workers pay non,JPmorgan makes 4bn a DAY profit,I'm sure they could manage of 100k a day profit,these corporations are bleeding us dry we need to reverse this

  • rate this

    Comment number 872.

    I support [31 - Bob Roberts - 20% flat rate] except:

    UK total tax ~£600b, ~30m current income taxpayers. So avg 20k/taxpayer. Avg salary 26k5. So ~76%.

    Also an avg of ~£30k/taxpayer should we wish to pay off the Gordon Brown Fiscal Incompetence Memorial Fund.

    Fair is not the same as 'ability to pay' - the latter is just pragmatic.

    People will always vote for free chocolate.


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