The All-Party Parliamentary Group for Anti-Corruption & Responsible Tax and TaxWatch published a report criticising HM Revenue and Customs and calling for reform today, October 26.
Alex Dunnagan, acting director of TaxWatch in the UK, took aim at the distinction between tax evasion and tax avoidance, claiming it has done “untold damage” to the UK tax system.
“Pursuing tax avoidance as a civil matter when there has clearly been fraudulent behaviour does not act as a deterrent,” he said. “HMRC should pursue tax fraud for what it is – a crime. Laws already exist to prosecute those committing tax fraud. HMRC should use them.”
The APPG-TaxWatch report argues that tax avoidance in some cases constitutes criminal tax fraud and refers to the criminal offence ‘cheating the public revenue’ as a wider category than tax evasion. If applied, this category could include tax advisers as well as their clients.
The APPG on Anti-Corruption & Responsible Tax is chaired by Margaret Hodge, Labour MP for Barking.
“HMRC should be enforcing the laws of the land, not the rules of the ‘tax fraud game’ that let tax avoiders and their enablers off the hook,” she said.
“We need a real deterrent to stop bad behaviour or these tax cheats will continue to flout the rules while most taxpayers struggle with the cost-of-living crisis,” she added.
Hodge argued that HMRC should be prosecuting advisers who enable the most aggressive forms of tax avoidance. The agency currently tackles cases of tax evasion where there is evidence of “active deception”.
This can take the form of concealing information or falsifying documentation. The cross-party group criticised HMRC for what it calls a “feeble approach to enforcement”, but recognised that the UK tax authority lacks the resources to tackle every tax avoidance scheme.
“Tax lies at the heart of the social contract,” said Hodge. “During this time of crisis after crisis, it has seldom been more important for our country to come together and pull in the same direction – toward security and prosperity for all.
“Any person or company that attempts to dodge paying their fair share – the tax avoiders and evaders – should be met with the full force of the law,” she argued.
Tax advisers can make recommendations that fit with UK tax law so long as there is no “active deception” and this reduces the deterrent to tax avoidance, the report claims. The APPG and TaxWatch favour a policy change to increase scrutiny on “unscrupulous promoters and advisers”.
A HMRC spokesperson told ITR: “HMRC is committed to tackling tax avoidance schemes targeted at individuals and the amount lost through them has fallen by two thirds since 2013/14.
“We continue to make it harder for promoters to sell tax avoidance schemes and to reduce demand – stepping up our efforts to warn individuals about the risks of being drawn into avoidance and helping them to get out of a scheme once they realise that they might be caught up in one.”
If the APPG-TaxWatch report gains traction, UK businesses can expect more scrutiny on tax matters and tax advisers may find themselves in the line of fire.
