UK tax fraud costs government £16bn a year, audit report says

HMRC under fire for focusing its efforts on small-scale tax evaders rather than multinationals that owe far larger sums

Tax fraud is costing the government a “staggering” £16bn every year but HM Revenue & Customs is failing to clamp down on complex tax evasion and organised criminal activity, a report by the government’s independent auditors has found.
The new figure, disclosed by HMRC, makes up almost half of the total £34bn “tax gap”, which is the difference between the revenue that should be collected each year and the amount actually received.

In a report released on Thursday by the National Audit Office, tax investigators are criticised for focusing their efforts on easy, low-value prosecutions for evading income tax, VAT and tobacco duty.

Tax officials should instead be chasing down multinationals involved in evasion and aggressive tax avoidance schemes, critics claim. Margaret Hodge, the chair of the all-party group on responsible taxation, said the report shows that small evaders are still being pursued at the expense of large firms.

“HMRC still focuses too much on small businesses – the easy wins – and lets the big multinationals off the hook. It’s one thing to tackle evasion – I want them to be much tougher on aggressive tax avoidance. All we are asking is that people pay a fair amount on the profits they make from their business in the UK,” she said.

The report examined the way that HMRC tackles tax fraud, which includes tax evasion worth £4.4bn, the hidden economy worth £6.2bn and criminal attacks worth £5.1bn.

It found that small and micro-businesses and individuals with complex financial affairs were major contributors to the risks associated with evasion and the hidden economy.

In 2014-15, HMRC reported £26.6bn additional revenue from its work to improve compliance, including efforts to tackle not just fraud but also other parts of the tax gap, such as error and legal tax avoidance.

The NAO found there were only partial data on how much of that revenue came from work to tackle fraud, estimating that the proportion was between 30% and 40%, or between £8bn and £10.6bn.

HMRC has met a target to increase its number of prosecutions by 1,000 by 2014-15, but the NAO said it “needs to better prioritise the cases it selects for criminal investigations”.

Auditors found the drive to meet the target had led to a focus on “less complex cases”, with a “large number of prosecutions for evading income tax, VAT and tobacco duty, and lower value cases”.

The NAO said HMRC had recognised it needed to “align the cases it selects for criminal investigation more closely with its analysis of risk and how effective a successful prosecution would be in creating a deterrent”.

The report said it was difficult to assess the effects of the prosecutions and HMRC research had not been able to find evidence that the cases led to changes in behaviour or increases in tax revenues.

Meg Hillier, the chair of the public accounts committee, said HMRC needed to think harder about how it tackles tax evasion, the hidden economy and criminal attacks.

“A staggering £16bn is still lost to tax fraud every year. Time and time again we hear that government departments don’t have the data or information that they need to plan or evaluate their activities properly, despite them being responsible for setting up these projects or programmes in the first place.

“HMRC is no different in this respect. HMRC needs to use the powers and sanctions it has to make a public example of those who break the rules,” she said.

A spokesman for HMRC said that the organisation is steadily reducing the tax gap to its lowest ever level and defended its attempts to tackle avoidance.

“Additional funding and new measures contained in the summer budget and autumn statement are allowing HMRC to crack down further on the hidden economy, get tougher on offshore evasion, and increase the number of prosecutions of wealthy tax evaders.

“The small minority who persist in dragging their feet, hiding or helping others to hide their money and assets at home or abroad, now face increased financial penalties and risk criminal prosecution,” he said.

“We target our investigations on the highest risk areas and the vast majority of tobacco fraud involves organised criminal gangs. The illicit tobacco market costs the UK around £2.1bn a year; [it] is large-scale theft from the taxpayer and undermines legitimate traders such as small businesses,” he added.

http://www.theguardian.com/politics/2015/dec/17/uk-tax-costs-government-16bn-each-year-audit-report-says


Bloody GGGGGGGGGGGGRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR!!!!!!!!!!!!!!!!!!!!!!!


And yet:

Government softens plan to criminalise unwitting offshore tax evasion
Trigger for prosecution will be loss to HMRC of £25,000 a year, up from £5,000 – but experts say legislation is ‘step too far’

http://www.theguardian.com/business/2015/dec/09/government-softens-plan-to-criminalise-unwitting-offshore-tax-evasion


Double GGGGGGGGGGGGGGGGRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Can you really blame the small avoiders when we have a misgovernment which gives our money to every Tom, Dick, Aala and Abdul.