Bigger amnesty penalty will deter disclosure
Observers are sceptical that an increase of penalty will encourage people to come forward to declare offshore accounts, under HMRC's second tax amnesty
The penalty HM Revenue and Customs applies to the next offshore tax amnesty
begs a question about how a penalty could encourage people to come forward to
declare untaxed income held offshore.
Last week it emerged the penalty is expected to triple from 10% of the tax
owed to 30%. Observers are sceptical that an increase will help the taxman.
So what is the right level? The department needs to strike a balance between
generating sufficient revenue and maintaining the compliance and co-operation
from taxpayers who came forward under the terms of the 2007 amnesty.
While tax advisers agree 30% is too high, if HMRC is to encourage people to
come forward, most also argue retaining a 10% penalty would be unfair to people
who disclosed information in the first amnesty.
Noshir Avari, of tax investigation consultants Avari, says a 30% penalty
would see too few taxpayers coming forward. ‘How could they expect people to
disclose with a 30% penalty when just £400m was collected through the first
amnesty. It’s not staggering,’ he says.
The second round of disclosures will see the net of targeted customers
broadened from the five major retail banks to as many as 500 other financial
institutions.
Advisers are urging HMRC to roll out an advertising campaign publicising the
next round of disclosures, with many attributing the absence of a widespread
campaign to low revenue generated in the first amnesty.