DCSIMG

Tax avoidance: Name and shame tax dodgers, say MPs

Protesters in London's Oxford Street demonstrate against tax avoidance in 2010. Picture: PA

Protesters in London's Oxford Street demonstrate against tax avoidance in 2010. Picture: PA

  • by ERIKKA ASKELAND
 

TAX dodgers using “aggressive” avoidance schemes to keep 
billions of pounds each year from the Treasury should be “named and shamed” to deter others, a committee of MPs has recommended.

Those that abuse legal loopholes to avoid paying tax and the companies that create the schemes they use are “running rings” around HM Revenue and Customs, a report from the public accounts committee (Pac) said today.

The call came as Prime Minister David Cameron yesterday launched another broadside at “aggressive” tax avoidance on the first day of a trade visit to India.

Margaret Hodge, chairwoman of the spending watchdog committee, said tax avoidance was a “game of cat and mouse, and HMRC is losing”. Its report levels criticism at wealthy individuals who shield income from tax, such as Jimmy Carr.

The television comedian publicly apologised last year for using a Jersey-based scheme dubbed K2 to shelter an estimated £3.3 million in income from tax.

Ms Hodge said: “Promoters of ‘boutique’ tax avoidance schemes like the one brought to our attention by the case of Jimmy Carr are running rings around HMRC.”

Ms Hodge also criticised HMRC for allowing the tax system to become too complex, which gives specialist companies leeway to take advantage of loopholes, while the agency has also failed to build in a sufficient deterrent.

“It has allowed a system to evolve where the dice are loaded in favour of the promoters of tax avoidance schemes,” she said.

Although HMRC currently publishes lists of schemes it has banned, it does not name the promoter behind it or its clients.

Ms Hodge said that publishing names would open them up to the same sort of criticism which saw Starbucks and Amazon face public ire over their tax avoidance.

She said: “There is also a lack of transparency that makes it very hard to find out who is involved in marketing or using these schemes.

“We have seen how public anger and consumer pressure can influence large companies, such as Starbucks, to behave more responsibly. HMRC should publicly name and shame those who sell or use tax avoidance schemes in order to discourage such activity.

“With at least £5 billion lost to tax avoidance each year, HMRC has got to get much more robust in its approach.”

However, a body representing tax specialists, the Institute of Chartered Accountants of Scotland (Icas), has warned such an approach could result in a “trial by media”.

“Icas has long believed that the UK tax system should be set out in clearly drafted legislation, operated by an effectively resourced HMRC,” said Icas 
director of taxation, Elspeth 
Orcharton.

She added that while the body – which guards standards in the profession – was “generally supportive” of targeting abusive tax planning schemes, the terms defining avoidance, which is considered legal, and evasion, which is illegal, are still unclear.

She said: “Whilst the definition of what is tax avoidance, and what is sensible financial planning, is still a matter of debate, the legislative route is likely to be more effective in achieving the Pac’s objectives than a proposal which could stray into trial by media.

“Tax avoidance is legal in the UK; for matters of illegal tax 
evasion, ‘name and shame’ 
provisions were introduced to legislation in 2010.

“At this stage there is no evidence we are aware of as to the effectiveness or ineffectiveness of those provisions.”

In a statement, HMRC said it was “glad the report exposes the practices of promoters who sell tax avoidance schemes to wealthy individuals”. But it defended its approach.

Mr Cameron said he was not convinced by the case for new laws. “I believe in low taxes. Governments should be trying to get their rates of tax down so they are competitive, but then I think it is only fair to ask businesses to pay them.”

 

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