HMRC rejects accusations of failing to chase big firms

Wednesday 25 December 2013

A committee of MPs is urging HM Revenue & Customs (HMRC) to up its game when it comes to tax avoidance by large, multinational organisations. MP Margaret Hodge, chair of the Public Accounts Committee, accused the UK tax authority of pursuing easier targets like small businesses and limited companies.

According to Ms Hodge, HMRC does not use the full range of sanctions at its disposal, and has failed to take action in mounting prosecutions against multinational companies. The most high-profile tax evading companies in the UK include Google, Starbucks, Amazon and Vodafone, the last of which paid 18.6 per cent less tax last year than it did in 2011 to 2012. With regards to each case, the MP Margaret Hodge said HMRC “lost its nerve” when it came to pursuing tax collection, therefore costing the UK £35 billion in missing payments.

The committee’s findings have been rejected by the HMRC, who say the statistics are “selective and misleading”. A spokesman from the tax authority said the MPs had chosen to highlight figures which showed an increase in money which had not been collected, rather than focusing on the percentage of uncollected tax – a number which has decreased since the 2012 to 2013 fiscal year.

In the past year, HMRC collected £475.6 billion in revenue for the government, which represents an increase of £1.4 billion since last year.

HMRC’s spokesman said: "HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by parliament. We have secured more than £50 billion of additional tax from our compliance work since 2010, including £23 billion from large businesses.”

The spokesman cited 2,345 prosecutions for tax evasion HMRC has carried out over the past three years. These prosecutions have included many high-profile individuals, and effectively halved the amount of disclosed tax avoidance schemes, HMRC’s spokesman said.

There is, however, a shortfall when it comes to offshore bank accounts, MPs warn. Last year, HMRC predicted it would collect £3.12 billion in unpaid tax between 2013 to 2014 from UK holders of Swiss bank accounts. So far, it has collected just £440 million. Out of the 16 individuals identified on the Lagarde list of Swiss bank account holders, only one has been prosecuted successfully.

“Changes in the controlled foreign company rules and the failure to close the loophole created by Eurobonds are two examples showing where it has become easier for companies to avoid tax while ordinary people continue to pay their share,” Ms Hodge said. “If that is HMRC’s real intent, then it should be open about it,” she added. “When designing the tax regime for businesses, HMRC needs to strike the right balance between support and enforcement.”

Head of taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury, defended the HMRC by saying a reduced budget has compromised their efficacy. Furthermore, government loopholes are allowing tax evasion to happen. Instead of pointing the finger at HMRC, Mr Roy-Chowdhury says “it is up to the government to clarify the rules and close any existing loopholes”. He added: “Blaming HMRC for not closing loopholes that benefit multinationals that exist in law suggests a misunderstanding of how the tax system works.”

By Victoria McDonnell

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