MPs blame HMRC for impression rich can evade tax

A report from the Committee of Public Accounts concluded not enough is being done by HMRC to tackle tax fraud in a report published today (15 April).

It 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.

HMRC has not set out a clear strategy for dealing with tax fraud and does not know what meeting its target of 1,000 additional prosecutions has achieved, the MPs ruled.

The committee described the department’s reporting of its own performance as “too confusing” and called on HMRC to address the perception it does not tackle tax fraud by the wealthy.

“We concluded in November 2015 that the number of criminal prosecutions for offshore tax evasion was still ‘woefully inadequate’, the report read. “HMRC told us that it needs to send the clear signal that anyone who evades tax runs the risk of prosecution.

“The failure to prosecute more than one individual from the Falciani list, HMRC having closed this case and the Financial Conduct Authority no longer taking further action, creates the impression that the rich can get away with tax fraud.”

The Falciani list was data from HSBC bank’s Geneva branch.

The report’s recommendations included HMRC clearly setting out in its annual reports the relationship between its compliance yields and changes in “the tax gap”, along with publishing this information “in a way that is accessible for everyone to understand”.

Tax fraud results in losses of some £16bn a year, almost half of the £34bn gap of how much it should be collecting, according to the MPs.

The release of the ‘Panama papers’ underlines that there are wealthy people and companies who seek to keep their affairs secret. Meg Hillier

The committee stated HMRC should set out its strategy to tackle fraud by November 2016 and take steps to “counter the belief that people are getting away with tax evasion”.

It called 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”.

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.

“The release of the ‘Panama papers’ underlines that there are wealthy people and companies who seek to keep their affairs secret.

“Where this secrecy involves criminal activity, prosecution must follow – and the threat of prosecution must serve as an effective deterrent to others.”

The ‘Panama papers’ covered nearly 40 years, from 1977 through the end of 2015, and were allegedly leaked from Panama-based global law firm Mossack Fonseca.

The 11.5m documents indicate banks, law firms, offshore players and even politicians often failed to follow legal requirements, while major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens.

Commenting on the papers earlier this month, Jennie Granger, director general of enforcement and compliance at HMRC, said: “HMRC is committed to exposing and acting on financial wrongdoing and we relentlessly pursue tax evaders to ensure they pay every penny of taxes and fines they owe.”

But Martin Dodd, owner adviser at Wolverhampton-based Midlands Investment Agency, branded the move “just a deflection from the point”.

“My view is the majority of affluent people pay a great deal of tax. Corporates like Google and Facebook are where the issues exist, not individuals,” he said.