‘We will be cooperating with the National Audit office on the study,’ a spokesman for Customs said. ‘Maybe there will be some recommendations made which we can adopt to improve our services.’
In particular, the NAO will examine how Customs decides what constitutes avoidance, how it measures avoidance, the ways it has tried to counter avoidance and the effects these measures have had.
‘We have several ways of tackling VAT avoidance. We do this mainly by taking companies to court or changing legislation,’ said the spokesman.
The spokesman said the office has done many things to improve its policing of VAT avoidance. Among these measures, he said Customs had hired new specialist accountants to deal with VAT.
In attempts to crack down on illegal VAT avoidance, Customs visits businesses every year looking for accounting discrepancies and other anomalies that might reveal abuses to the system.
Among the changes in legislation, the office made changes to the VAT grouping provisions designed to simplify accounting for large companies and multinational corporations. The new law – modified in 1999 – allows Customs to name companies to be excluded from the grouping provisions.
Customs has been particularly concerned with VAT avoidance since the late 1980s, finding that some companies were avoiding tax legitimately but by means which ‘the department believe to be defeating the intention of the law.’
‘The department takes VAT avoidance seriously,’ said the spokesman.
‘We are concerned with fairness; we want a system which will enable the tax burden to be distributed evenly.’
In March 2000, the House of Commons Public Accounts Committee expressed concern that some large businesses are not complying the rules of VAT trading. The committee said Customs had audited 38% of high-risk traders, while it had audited three times as many low risk traders.
The spokesman denied this, saying: ‘We pay more attention to high-risk companies. The visiting program we have is based on risk analysis a lot of the large companies.’
Customs told to bolster fight against VAT avoidance