A UK government measure to crack down on the improper use of local tax havens appears to have all but failed, thanks to a lack of resources and a failure of individuals to volunteer information.
According to the Office for Budget Responsibility (OBR), the “tax repatriation from Jersey, Guernsey, and Isle of Man” measure announced in 2013 was originally expected to raise £1.05bn by 2017. But in its budget paper released last week, the OBR said it had downgraded this to £270 million, just a quarter of the original projection.
There were two reasons for this, it said. The first was that there were “far fewer” voluntary disclosures than expected. HM Revenue and Customs told OBR that this was due to “a number of factors, including HMRC campaigns being less effective and with less coverage than expected and a perceived lack of awareness from those targeted”.
The second reason was lack of resources.
“HMRC is also now less optimistic about how much of the lost yield can be recouped through additional compliance activity, on the basis that they are unlikely to be able to work the higher number of additional cases on top of existing workloads,” the OBR wrote on page 223 of its ‘Economic and Fiscal Outlook 2016’ paper.
However, it also wrote that HMRC is expected to spend £7m recruiting staff over the coming year “for operational activity against property-related tax avoidance and evasion using offshore structures”.
HMRC feels the pinch
The Mail quoted tax barrister Jolyon Maugham QC as saying: “The wealthy are escaping the consequences of tax evasion because HMRC cannot pursue the cases. The idea of an amnesty is that you front up now and avoid the bad consequences later. This OBR report reveals that the equation is now: front up now but if you don’t there’s not much we can do.”
In November the government announced cost cutting measures, including the closure of regional 137 offices by 2027. It hopes these measures will cut annual costs by £100m by 2025.