Tax cheat curb plans are useless

New plans to hit firms that sell tax avoidance schemes with heavy fines are useless – because the Tories have stripped HM Revenue and Customs (HMRC) of its resources for catching cheats, leading campaigners have said.

On August 17 the government published proposals to slap lawyers, banks and accountants who provide services that result in illegal tax avoidance with fines of up to 100 per cent of the money owed if their schemes are defeated in tribunals. The moves would also see repeat offenders named and shamed.

Any efforts will be toothless, however, if HMRC doesn’t have the resources to bring the culprits to justice, according to the president of the association of revenue and customs (ARC), Vicky Johnson.

Since 2004 HRMC staffing has fallen from more than 100,000 people to 59,857 today. HRMC’s budget has also fallen dramatically in recent years – from £4.4bn in 2005 to £3.2bn in 2016.

“ARC has always welcomed any move to tackle tax avoidance and ensure that everyone pays the correct amount of tax. The most effective way to do this is to provide HMRC with the investment it needs to be properly resourced,” Johnson said.

HRMC now only has the capacity to investigate 35 major tax avoiders per year.

According to Prem Sikka, professor of accounting at the University of Essex, in February HRMC had 81 specialists who could investigate the movement of profits offshore to avoid taxes. To investigate just one major company takes between 10 and 30 specialists, Sikka said.

Nor does the UK have the judicial capacity to bring enough cases to tribunal in order to implement the measures on a wide scale, Sikka said, pointing to the backlog of 27,000 pending tribunals from 2015.

‘Too close’

Compounding the issue are top tax officials’ close relationships with big business. “HMRC’s board is populated with individuals with links to big corporations, law and accountancy firms. They are too close to big business and have shown no desire to craft cases or rules which might come back to haunt them,” Sikka said.

“Despite critical parliamentary reports there is a dearth of test cases involving multinational corporations. HMRC Executive Chair Edward Troup once said that ‘taxation is legalised extortion’. Unsurprisingly the House of Commons Public Accounts Committee (PAC) described HMRC’s efforts as ‘woefully inadequate’.”

Ultimately tax avoidance can only be tackled by “independent, effective, publicly accountable and well-resourced institutional structures,” believes Sikka.

Unite assistant general secretary Steve Turner seconded Sikka’s proposals – but said they were unlikely to happen under a Tory government.

“The proposals sound tough but they are empty words. The truth is that since the Tories began imposing their austerity agenda HRMC has been turned into an empty shell that runs on a skeleton staff,” Turner said.

“Tax dodgers know HMRC simply do not have the resources to investigate the vast majority of cases. Staff are unable to deal with the massive caseloads – leaving tax avoiders and those that aid them free to carry on as normal.”

Turner added, “Theresa May says she’s on the side of working people, but initiatives like these without the backing of a strong HRMC are just a distraction that only benefit big business and the very richest.

“If the government truly wanted to address the shocking levels of tax lost through opaque and shady schemes, they would invest in HRMC and implement reforms that would make it fit for purpose.”