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HMRC Failing Taxpayers, MPs Say

by Robert Lee,, London

05 November 2015

The UK's Public Accounts Committee (PAC) has described the number of prosecutions for tax evasion as "woefully inadequate" and warned that HM Revenue and Customs's customer service is so bad that it could be having "an adverse impact on the collection of tax revenues."

The Committee has now issued a series of urgent recommendations, in its new report on HMRC's performance during the fiscal year 2014-15.

Meg Hillier, the Chair of the PAC, said: "HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better. We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public. It's also important that the majority who play by the rules, paying their tax on time and in full, see that those who don't will face the consequences."

"Tax avoidance also remains a serious concern. Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament. If tax law is to be improved then HMRC must as a priority provide Parliament with comprehensive details of avoidance."

HMRC estimates that its compliance work saved GBP26.6bn (USD40.9bn) in 2014-15. In his Summer Budget, Chancellor George Osborne announced that HMRC would be given a further GBP800m and would be tasked with collecting an additional GBP7.2bn from compliance work between 2015 and 2020.

The PAC concluded that HMRC's investigations into offshore tax evasion do not lead to sufficient prosecutions to provide an effective deterrent. There have been 11 prosecutions in relation to offshore tax evasion since 2010.

HMRC informed the Committee that it has exhausted the so-called Falciani list (a list leaked by a former employee of HSBC that included details of a number of UK taxpayers with Swiss bank accounts), noting the document did not meet the standards required for UK evidence. It also pointed out that it had offered disclosure facilities with reduced penalties for those disclosing information on assets held offshore. However, the Committee concluded that the use of these disclosure facilities is not an adequate substitute for the deterrent effect of prosecution.

According to the PAC, HMRC should strengthen its capability to investigate offshore tax evasion and bolster the criminal and civil sanctions it can apply.

Hillier also said "HMRC must also rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection."

TAGS: individuals | compliance | tax | tax compliance | tax avoidance | revenue guidance | government committee | law | United Kingdom | tax authority | offshore | tax planning | HM Revenue and Customs (HMRC) | revenue statistics | standards | penalties | HM Revenue and Customs (HMRC) | Tax | Tax Evasion

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