THE PUBLIC ACCOUNTS COMMITTEE has highlighted “serious and ongoing” concerns around tax evasion and avoidance in its latest report of session.
It describes the number of prosecutions for offshore tax evasion as “woefully inadequate,” while it identifies HMRC’s failure to gather intelligence on losses through aggressive tax avoidance as an obstacle to improving the UK’s tax laws.
The report calls on HMRC to identify and report the value of all tax avoidance schemes in order to demonstrate the scale of the tax avoidance problem and allow parliament to draft better law.
In particular, the committee was disappointed with the use of so-called Lagarde List stolen from HSBC’s Swiss arm, data from which has now been “exhausted”. In total, HMRC raised around £142m from the cache leading to around 950 lines of enquiry and one conviction – that of property tycoon Michael Shanly, who was hit with an £800,000 bill for tax evasion.
The committee also raised fresh concerns over HMRC’s ‘customer’ service, saying it now considers it so bad it could be having “an adverse impact on the collection of tax revenues”.
The tax authority pledged in June to allocate £45m of its budget to improving its ‘customer’ service, as it released statistics which showed an inconsistent call handling performance in 2014/15.
The move will pay for around 3,000 additional staff to join customer service teams, in addition to 2,000 staff who are being moved over from other parts of HMRC to help with the tax credits deadlines, letters and forms.
HMRC receives more than 60 million calls a year, peaking around key deadlines such as 31 January for self-assessment, and 31 July for tax credits renewals.
Its performance has been a regular source of problems and criticism in recent years, particularly in the context of its contact centre closures.
Approximately 73% of calls were answered last year – short of the department’s 80% target – with inconsistent service standards across the year, with some months falling below 70%, bottoming out at 65.4% in September.
However, HMRC has made improvements to its performance, collecting £517.7bn from UK taxpayers in 2014/15, some £11.9bn more than in 2013/14. As a result, the department improved its ratio of revenue collected per £1 of administrative expenditure from £138.14 in 2010/11 to £166.95 in 2014/15.
PAC chairwoman Meg Hillier (pictured) said: “HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better. HMRC must also rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection.
It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”
PCS general secretary Mark Serwotka said: “It has been abundantly clear for years that the department has cut too many staff and that services are suffering.
“The department needs major investment backed by a real political commitment to tackle tax evasion and avoidance as an alternative to more damaging spending cuts.”
A spokesman for HMRC said the authority is “disappointed” with the committee’s assessment, adding it had already explained its efforts to improve its ‘customer’ service to the committee.
He added: “Tackling tax evasion is a top priority for HMRC and last year alone we successfully prosecuted a record 1,200 cases, resulting in 407 years of custodial sentences. We also routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action.”
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