HMRC ‘lost its nerve’ over corporate tax evasion, MPs say

HM Revenue and Customs has “lost its nerve” in the fight against tax avoidance by multinational corporations and wealthy individuals, a committee of MPs has claimed.

In a new report, the public accounts committee says that that HMRC is not using the full range of sanctions it has at its disposal to pursue tax avoiders.

This failure is illustrated, the MPs say, by amount of tax collected from British holders of Swiss bank accounts. 

In his 2012 autumn statement, chancellor of the exchequer George Osborne said HMRC would collect over £3.1 billion from such accounts by March 2014. So far this year, only £440m has been brought in.

Despite promises from officials to crack down on tax dodgers, in real terms, tax income fell last year when compared to 2011/12. In 2011/12, the disparity between the amount expected by the exchequer and the amount actually collected grew by around £1 billion. 

Margaret Hodge, chair of the public accounts committee, said HMRC had failed to show that it was on the side of the majority of people who pay their taxes in full.

“HMRC holds back from using the full range of sanctions at its disposal”, she said. 

“It pursues tax owed by the smaller businesses but seems to lose its nerve when it comes to mounting prosecutions against multinational corporations.” 

The committee suggested that in its efforts to attract investment in the country, HMRC was allowing international corporations to dodge taxes.

“Changes in the controlled foreign-company rules and the failure to close the loophole created by eurobonds are two examples showing where it has become easier for companies to avoid tax while ordinary people continue to pay their share”, Hodge added. 

In August it was revealed that the number of criminal prosecutions for tax evasion in the UK had more than doubled in a year. However, critics claimed that HMRC had specifically targeted middle class professionals such as doctors and lawyers, instead of the richer evaders who may be harder to prosecute, in order to boost its success rate.

The public accounts committee noted how the lack of prosecutions against big multinationals contrasted with HMRC’s crackdown on smaller businesses.

The tax authority rejected the committee’s findings, saying they had used figures selectively.

A spokesman added, “HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by parliament.”

Further reading:

MPs support Amazon Christmas boycott over tax avoidance

Barclays accused of promoting tax havens

HMRC doubles tax evasion prosecution rate by targeting middle class

Google, Amazon, etc: blame tax laws, not the taxman or taxpayer

Corporations and tax avoidance: the time is right for investors to push for change