Some 15 UK MPs have slammed HM Revenue & Customs for creating the impression that “rich can get away with tax fraud”.
In a report published today , the MPs, members of the cross-party Committee of Public Accounts, dubbed HMRC’s own reporting of its performance as “too confusing” and said that the number of criminal convictions remains “woefully inadequate”.
The committee pointed that tax fraud results in losses of some £16bn a year in the UK, almost half of the £34bn tax gap — that is, the difference between the amount of tax HMRC collects and how much it should, in theory, be collecting.
The committee said it found HMRC had not set out a clear strategy for dealing with tax fraud, and had concluded that it didn’t know what meeting its target of 1,000 additional prosecutions had achieved.
Failure to prosecute
The committee referred at one point to the failure to prosecute more than one individual from what is referred to as the “Falciani list” – HMRC having closed the case and, the Financial Conduct Authority no longer taking further action – as having created the “impression that the rich can get away with tax fraud”.
The ‘Falciani list’ was drawn from data received from HSBC’s Geneva branch.
Meg Hillier, MP, chairman of the committee, said: “Honest taxpayers rightly expect a tax system that works fairly for all, and any perception that this is not the case undermines the public’s trust in that system”.
‘There must be consequences’
“The release of the ‘Panama Papers’ underlines that there are wealthy people and companies who seek to keep their affairs secret. When people break the law, there must be consequences – and there must be seen to be consequences”.
The committee said that it also concluded in November 2015 that the number of criminal prosecutions for offshore tax evasion was still “woefully inadequate”.
Among its new recommendations, the committee urges HMRC to “clearly set out in its annual reports the relationship between its compliance yields and changes in the tax gap”, and also publish this information “in a way that is accessible for everyone to understand.”
‘Getting away with tax evasion’
The committee has issued a deadline that HMRC should set out its strategy to tackle fraud by November 2016, and also take steps to “counter the belief that people are getting away with tax evasion”.
It also stated the tax office has made “only limited progress” in reducing the level of losses through the crime, which has been “relatively constant” over the last five years.
It calls on HMRC “to increase the number of investigations and prosecutions, including wealthy tax evaders, and publicise this work to deter others from evading tax and to send out a message that those who try will not get away with it”.
Hillier added: “The department must be far clearer with parliament and the public about its strategy for combating tax fraud and the impact of that strategy on the tax gap. To achieve this it needs a better grasp of its own work.
“The evidence we heard from HMRC did not convince us it properly understands the effectiveness of the different enforcement and deterrent tactics it employs. This is a fundamental weakness in its strategy.
The report also outlined that from this month there will be “significant changes” in senior management at HMRC as a result of its findings.
HMRC hits back
A spokesperson for HMRC hit back at the allegations with a statement that “no-one is beyond our reach”.
It read: “HMRC is one of the most effective tax collectors in the world, getting 93 pence of every pound due. Few other countries have a smaller tax gap. Tackling tax evasion is an absolute priority for HMRC with 26,000 staff focussing on evasion, avoidance and fraud.
“HMRC is currently investigating 1,100 cases of offshore evasion, including 90 criminal cases, of which 29 cases are already in the court system, ensuring that no-one is beyond our reach.”
To read the full CPA report, published today, click here.