HMRC chiefs face grilling by MPs over lost tax

Officials will be urged to prosecute more evaders as giant firms' schemes left out of avoidance figures

The credibility of HM Revenue and Customs' £35bn estimate of Britain's "tax gap" – the amount lost from the public purse to evasion, avoidance and payment failure – is expected to face fierce challenge when three top officials appear before a parliamentary committee on Monday.

MPs on the public accounts committee, chaired by Margaret Hodge, are expected to ask why the complex tax policies of Google, Amazon and Starbucks do not register in official avoidance figures. When HMRC this month published its tax gap figures for 2012, it said the amount lost to what it narrowly defines as tax avoidance was just £4bn, the same amount as the previous year.

Other factors – including £5.1bn lost to evasion, £5.4bn to the hidden economy and £4.3bn to companies and individuals failing to take reasonable care – were all more costly than avoidance, HMRC claimed.

Tax fairness campaigners have criticised HMRC for excluding from its tax gap calculations what many, including the prime minister and chancellor, have described as tax abuse. MPs investigating the complex world of big-business tax engineering have accused HMRC of getting too close to large companies and tax advisers, and of failing to crack down on what they describe as abuses. The politicians are expected to ask why a more robust approach is not being taken towards multinationals, particularly internet and technology groups, whose business models frequently lend themselves to aggressive tax engineering. Other European countries, led by France, have raided offices of high-profile corporations including Google, Microsoft and LinkedIn.

This month the former energy secretary Chris Huhne attacked HMRC for its willingness to reach settlements with suspected tax evaders holding tens of thousands in Swiss bank accounts. He also said tax evaders using Liechtenstein had been offered "amnesty-lite" deals. In both cases, HMRC's approach contrasted with that of authorities in France and Germany.

In the past week there have also been reports of companies, including many British energy groups, exploiting tax-haven stock exchanges to qualify for a UK tax break known as the "quoted eurobond exemption". Ministers' plans to close loopholes in this area last year were ditched after an HMRC consultation.

On Sunday Chris Leslie, shadow chief secretary to the Treasury, said: "David Cameron needs to explain why he decided not to close down this tax loophole, which we know some energy companies are using to avoid millions in tax."

Among the officials appearing before MPs will be Edward Troup, HMRC's senior tax professional, responsible for overseeing settlements in sensitive tax disputes.

Alongside him will be Jim Harra, head of business tax, who is expected to repeat his insistence that HMRC is doing a good job and any loopholes exploited by the likes of Google and Amazon are a matter for international bodies such as the G20 and OECD, not for HMRC.

Jennie Granger, head of enforcement and compliance, is expected to face tough questioning on why HMRC agreed settlements with tax evaders rather than prosecuting. MPs will also want to know why more cannot be done to extract financial penalties from big accountancy firms shown to have marketed tax schemes

Granger is expected to maintain that HMRC's efforts to tackle marketed tax avoidance schemes continue to bear fruit, pointing to a win rate of eight out of 10 tax avoidance cases in 2012-13, producing more than £1bn in tax receipts.

That view is in contrast to the analysis of Amyas Morse, comptroller and auditor general of the National Audit, who noted that there were 41,000 open case relating to marketed avoidance schemes, suggesting that HMRC had "yet to demonstrate whether it could successfully manage this number down".

Granger has already defended HMRC's record. In July she said: "Compared to other countries that publish tax gap estimates, and allowing for differences in methodologies, we believe that the UK's tax gap is towards the lower end of the range."

She insists her tax inspectors are well resourced and able to "man mark" the largest firms operating in the UK. She claimed they brought in £20.7bn of revenues last year, a record total, with £8bn coming from large business.

Article Source : http://www.guardian.co.uk
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