PBR in depth: Squeeze put on VAT avoidance
Customs and Excise will begin a controversial program to clamp down on VAT avoidance following Gordon Browns pre-Budget report.
Link: Pre-Budget special report
The strategy includes the appointment of 1,000 staff to both ‘enhance existing efforts in the key problem areas’ as well as provide the resources for the newly announced activities.
To help both the Revenue and Customs they will recruit: ‘a number of new highly-specialised anti-avoidance experts with proven ability to identify and shut down legislative loopholes and abusive tax avoidance schemes.’
This, according to Chas Roy-Chowdhury, head of tax at the ACCA, could amount to the poaching of tax experts fresh out of the private sector for short-term periods to make the government aware of the current loopholes.
Customs will also work alongside the Inland Revenue on ‘those businesses who continue operating above the registration threshold but outside the VAT system.’The moves will anger tax advisors and accountants across the country who think the main problem – over complexity of the system – has not been tackled.
‘The UK tax system is creaking at the seams,’ said Roy-Chowdhury. ‘It seems the governments approach is to attack the fringes – probably unjustifiably – and not look at why it’s actually happening.’
In order to ensure the strategy is successful, the government has set itself targets. Customs has been set the initial target of stopping the growth in VAT losses as a percentage of its theoretical yield.
It wants to reduce the problem by one fifth by 2005-06. If successful, the measures will amount to an extra £2bn a year in VAT revenue by 2005-06.