MPs grill HMRC chiefs over lost tax

The credibility of HM Revenue & Customs’ tax avoidance figures were questioned earlier this week as officials faced challenges by a parliamentary select committee.

Senior officials Edward Troup and Jim Harra faced questions relating to the £35bn estimate of Britain's "tax gap" – the amount lost from the public purse to evasion, avoidance and payment failure.  In particular they were asked why giant firms' schemes have been left out of the avoidance figures

Chair of the public accounts committee Margaret Hodge accused HMRC of being too timid with big companies, urging them to ‘test the law and make a few show cases of firms with a complex tax arrangements such as Google, Amazon and Starbucks whose business models frequently lend themselves to aggressive tax engineering.

HMRC’s Head of Business Jim Harra defended their record saying that they could only collect what was legally due under the rules currently in place. 

He maintained that HMRC were actively pursing aggressive avoidance schemes and highlighted a current investigation into Google’s tax arrangements in Ireland by a whistle-blower.

Officials also drew attention to their increased success in tackling marketed tax avoidance schemes in 2012-13 which produced more than £1bn in tax receipts.

However, they were forced to admit that an exchange deal with Switzerland would bring in far less revenue than the £3bn expected.  The deal has netted just £440m this year and £782m in total since the agreement to exchange information on UK tax avoidance was signed.  According to Margaret Hodge’s calculations this would making HMRC “£2.5bn light’ this year and would need to be reflected in next month’s Autumn Statement by the Chancellor.

Edward Troup and Jim Harra admitted that forecasts had been inaccurate and blamed the secrecy surrounding the Swiss Banking system, saying their concerns had been communicated to Swiss officials.

The revelations will do little to appease tax fairness campaigners who still perceive HMRC as being too close to large companies and tax advisers, and failing to crack down on what they describe as abuses.

They will argue that questions still remain over why HMRC agreed settlements with tax evaders rather than prosecuting and why more cannot be done to extract financial penalties from big accountancy firms shown to have marketed tax schemes


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