MPs say HMRC should use terror legislation on evaders

MPs have urged HM Revenue & Customs to trap tax evaders
by employing new powers intended for the fight against terrorists and money launderers. The new powers use information supplied by accountants and other professionals.

The demand came from members of the Commons Public Accounts Committee after HMRC acting chairman Dave Hartnett made it clear he had no intention of doing battle with the professional bodies who took action in the courts to limit the purposes for which information obtained in the anti-terror fight can be used.

The PAC report strongly criticised the tax authorities for doing too little to crackdown on black economy losses which ‘might be over £2bn a year’

The report revealed that the department has raised £27m out of £74m expected from investigating Suspicious Activity Reports (SARs) made to the Serious Organised Crime Agency indicating significant numbers of people with undeclared income.

The money stemmed from information coming from reports between April 2004 and March 2007 to complete 7,150 investigations. The ruling was in 2006.

The PAC demanded: ‘The Department should consider whether to seek alternative powers to strengthen this work.’

Hartnett confirmed in evidence to the committee that ‘our compliance people might wander around a harbour and take a note of all the larger sized boats and trace them’ along with helicopters and private planes and use the information in data matching exercises to ensure tax was paid on the money used to purchase them.

The committee demanded that more is done to investigate and prosecute suspicious cases, after more than 120,000 calls in 2006-07 to a tax evasion hotline - but only 2,000 investigations completed yielding £2m from an expected £32.5m.

MPs said not enough use is made of the power to impose penalties and prosecute the worst offenders and urged a similar exercise to the offshore disclosure arrangements under which last year 45,000 people with funds in overseas bank accounts came forward to pay £400m to fight other forms of evasion.

Chairman Edward Leigh clamed HMRC said: ‘HMRC must also do much more to
publicise both the benefits of joining the formal economy and the potentially serious consequences of not doing so… backed up by resolute action by the department to complete more investigations, apply the full range of new penalties available and ramp up the number of prosecutions.’