Name and shame tax avoiders, HMRC says
Tax avoidance schemes should be discouraged by the naming and shaming of those who promote them, according to a new report by the public accounts committee.
Margaret Hodge, the chair of the public accounts committee, has promised that the Treasury will crack down on tax avoidance schemes after it emerged that £5bn was lost to tax avoidance in the financial year ending 2011. “It is a game of cat and mouse and HMRC is losing,” she said.
The report – which comes in the wake of numerous tax avoidance scandals including those of comedian Jimmy Carr, online retailer Amazon and Starbucks – cites a proliferation of complicated schemes, many of which rely on elaborate offshore structures. Ms Hodge said the abundance of such schemes had allowed a system to develop “where the dice are loaded in favour of the promoters”.
“The complexity of tax law creates opportunities for avoidance, there are no penalties to stop people promoting these schemes, and HMRC is ineffective in challenging promoters who are deliberately obstructive or deliberately sell schemes they know do not work,” she said. “Promoters pocket their fees whether their schemes work or not.”
“HMRC should publicly name and shame those who sell or use tax avoidance schemes in order to discourage such activity.”
Naming and shaming
Richard Murphy, director of Tax Research UK, said: “Naming and shaming can work but is also a critical form of consumer protection. Customers that end up using tax avoidance schemes are often unaware of the levels of tax abuse to which they are being left accountable.
“We need to have stronger anti-abuse legislation in place. And accountants and lawyers that are flaunting the rules need to be aware of the potential consequences.”
The move comes amid a wider clampdown on tax avoidance structures. From April, firms tendering for government contracts must declare in their bid paperwork if they have used a tax structure that HMRC objected to, which was either defeated at a tribunal or has led to an out-of-court settlement in the last decade.
Civil servants can bar firms from Whitehall contracts if not satisfied that the companies have reformed their approach to tax.