A damning report from Parliament’s public spending watchdog has given HM Revenue & Customs six months to set out its strategy for tackling tax fraud.
The Public Accounts Committee raised serious concerns about the ability of the UK’s tax authorities to prosecute tax dodgers, as well as its effectiveness as a deterrent.
In particular, the committee expressed concerns that HMRC had been unable to clarify how much resource it expends on tackling tax fraud compared to other types of compliance work, and that the tax office had also failed to show how much additional tax revenue it generates through that work, and has given HMRC until November to clarify its strategy for tackling fraud.
Labour MP and PAC chair Meg Hillier says: “Honest taxpayers rightly expect a tax system that works fairly for all and any perception that this is not the case undermines the public’s trust in that system. Its credibility is at risk.
“The release of the ‘Panama Papers’ underlines that there are wealthy people and companies who seek to keep their affairs secret.
“Where this secrecy involves criminal activity, prosecution must follow – and the threat of prosecution must serve as an effective deterrent to others.
“The department must be far clearer with Parliament and the public about its strategy for combating tax fraud and the impact of that strategy on the tax gap. To achieve this it needs a better grasp of its own work.
“The evidence we heard from HMRC did not convince us it properly understands the effectiveness of the different enforcement and deterrent tactics it employs. This is a fundamental weakness in its strategy.”
In the aftermath of the Falciani Papers leak last year, the PAC recorded concerns that the number of criminal prosecutions for offshore tax evasion was “woefully inadequate”, and the committee has reiterated that numbers of investigations and prosecutions need to increase.
The PAC report states: “HMRC must do more to tackle tax fraud and counter the belief that people are getting away with tax evasion.
“It needs to increase the number of investigations and prosecutions, including wealthy tax evaders, and publicise this work to deter others from evading tax and to send out a message that those who try will not get away with it.”