UK Tax Authority Under Attack

UK Tax Authority Under Attack

Thu 19 Dec 2013

In the UK, The Independent newspaper is today running the headline “Take from the poor, but not the rich”, following the publication of the UK Public Accounts Committee (PAC) report on HMRC tax collection. The main challenges to HMRC were lower than expected tax collected from undisclosed Swiss bank accounts (£440m vs £3.12bn) and that it wasn’t prosecuting enough large multi-national companies. The PAC were most concerned that the “tax gap” (ie the difference between the amount collected and what should be collected) increased in 12/13 compared to 11/12 and that this gap even excludes revenue lost through “aggressive tax avoidance”.

It seems one of the reasons for the shortfall in expected revenues from Swiss bank accounts is that, at the outset, it was purely guesswork as to the amounts “hidden away” (probably based on a small amount of factual assessment and many assumptions). Making the decision to “bank” the £3m at the time seems to have been the biggest mistake.

HMRC are also in a difficult position regarding prosecutions. These inevitably take a significant amount of time to pursue and if HMRC are choosing to spend the time and resource available to them to maximise tax revenues, then this may be the right strategy. Equally, one can only prosecute when something is illegal, something that most tax avoidance is not.

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