THOSE PROMOTING OR USING tax avoidance schemes should be "named and shamed" in order to discourage the practice, according to the chair of the Public Accounts Committee.
Following the publication of its report, Tax avoidance: tackling marketed avoidance schemes, committee chair and Labour MP Margaret Hodge (pictured) said "the die are [sic] loaded in favour of the promoters of tax avoidance schemes" who are "running rings around" HM Revenue & Customs.
The report noted avoidance cost public purse around £5bn in 2010/11, while it is estimated about £10.2bn is presently at risk.
The committee report warned that the taxman was losing the "game of cat and mouse" to clients and promoters of tax avoidance schemes as they deliberately take advantage of the time it takes HMRC to shut down a particular method.
In addition to publicising schemes that have been caught, HMRC should publicly name and shame those who use or sell avoidance schemes, the report said.
"Promoters of ‘boutique' tax avoidance schemes...are running rings around HMRC," Hodge said. "They create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those intended to encourage investment in British films, and then sign up as many clients as possible, knowing that it will take time for HMRC to change the law and shut the scheme down."
She added a "more robust approach was needed and that a "name and shame" system would "discourage such activity".
"We have seen how public anger and consumer pressure can influence large companies, such as Starbucks, to behave more responsibly," she said.
The taxman does have powers to publish details of deliberate tax defaulters, which were brought in during March 2010. For a tax dodger to be named, a lengthy set of criteria must be satisfied.
The Disclosure of Tax Avoidance Schemes (DOTAS) rule means promoters must notify the taxman of new schemes, leading to the prompt closure of many, according to the committee's report.
However, it raised concerns that HMRC was unaware of how many are simply ignoring the requirement.
Hodge said: "We are also alarmed to hear that promoters are getting off paying fines for not disclosing their schemes by pleading that, in the opinion of a QC, they have a ‘reasonable excuse' for non-disclosure.
"The number of cases HMRC takes to court is tiny compared to the overall caseload. It must make use of the additional resources it has been given to act much more urgently to investigate and close down new schemes and to bring more cases to court."
Welcoming the report an HMRC spokesman said: "We are glad the report exposes the practices of promoters who sell tax avoidance schemes to wealthy individuals. In the last year alone the courts have ruled in HMRC's favour in multiple tax avoidance cases where over £1bn has been protected.
"Additionally the government recently announced an extra £77m in HMRC funding to tackle evasion and aggressive avoidance; we have also already consulted on strengthening the regulations around these schemes; and, for the first time ever, this government is introducing a General Anti-Abuse Rule which will make it even harder for people to avoid paying their share of tax."
There has been an increased focus on avoidance recently. Both the prime minister and the chancellor this week pledged further action against tax avoidance, while the G20 nations and the OECD are exploring greater international action in order to prevent multinational companies using double-taxation agreements and low-tax jurisdictions to drive down their tax bills.
To be clear, the people to be 'named and shamed' are complying with the law as it currently stands. And the naming and shaming is to be done by a civil servant in HMRC? Would such people have redress under the law for being publicised in this way?
Posted by: John Rowley, 19 Feb 2013 | 13:49
Public posturing aside (don't get me started on the legal and factual inaccuracies from la Hodge), surely the authorities have been following this policy by stealth in any case...witness the many 'tax dodger' headlines thus far? Nice to see public funds being spent on a regugitation of past activities repackaged as recommendations for the future....
Posted by: Sophie Starkey, 20 Feb 2013 | 08:51
What she doesn't realise is that this could seriously backfire on her as this could be seen as advertising for the firms that HMRC cannot deal with because they are too good and therefore these firms will attract more business for the tax avoidance firms advising them. In addition it will also highlight exactly how ineffective HMRC are at their job.
Lastly presumably she will include herself and her family company in the first list of names for disclosure.
Posted by: Nigel Reynolds, 20 Feb 2013 | 08:51
This would be so easy to implement. Essentially anyone who enters a DOTAS notifiable scheme (including a scheme not notified but later on found ought to have been notified) shall have their name, details of how the scheme works and the promotor etc immediately published on the HMRC website. This would be a major disincentive, especially to high profile taxpayers, celebrities etc who will then not touch it with a bargepole. Don't like it? Then don't get involved in DOTAS schemes.
Posted by: Jon Griffey, 20 Feb 2013 | 09:06
Since tax avoidance is the right of every taxpayer, whether corporate or individual , where is the namiing and shaming of these taxpayers going to end? Paying tax is not a moral obligation
it is a legal one which has nothing to do with morality. Ms Hodge should stop crusading and legislate if clarity is required.
Posted by: Nigel Collin, 20 Feb 2013 | 09:41
What I actually emailed Margaret Hodge about over a month ago was to ask why, when a tax avoidance scheme is ruled ILLEGAL and therefore EVASION, the ICAEW members inside the big firms who thought them up are not not penalised by either their employer, professional body or HMRC.
I also asked her to ask how many CCAB members from within the big four have been excluded from membership for unethical practices.
But as the advisers to her committee include those self same people, oddly enough my question got twisted.
And the revolving door of sharp suits between Westminster and the big 4 carries on.
Posted by: Eleanor Greene, 21 Feb 2013 | 09:23
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