LONDON: Margaret Hodge and the Public Accounts Committee (PAC) urged HMRC to further its efforts to crack down on big businesses that evade tax.
In a new report issued by the PAC, Hodge criticised the disparity in ways that SMEs and big businesses are treated by the Revenue.
“HMRC needs to show that it comes down hard on tax cheats,” Hodge said.
“[The Revenue must] change the perception that it is far too tolerant of these companies and individuals – in contrast to its treatment of small businesses and the majority of the public who pay their taxes through PAYE.
“We are not persuaded that HMRC and the Crown Prosecution Service are doing enough to prosecute serious tax evasion cases.”
Hodge went on to cite the recent scandal surrounding HSBC’s Swiss Bank, where evidence suggests that the bank’s staff were actively helping clients to evade tax.
While more than 1000 names of suspected evaders were handed to HMRC, there has only been one prosecution to date, and it remains unclear as to what action – if any – is being taken against HSBC.
While the PAC recognised that the government had led the global fight against both tax evasion and avoidance, Hodge called on the next government “to tackle both the industry and culture that surrounds and supports tax evasion and aggressive avoidance”.
The PAC also recommended a thorough review into the role and implementation of tax reliefs, arguing that the large number of reliefs available – there are currently 1,140 tax reliefs – made it easy for avoiders and evaders to exploit the system.
“For as long as the UK has such a complex tax code, opportunities for aggressive tax avoidance and evasion will continue to be exploited,” Hodge explained.
“This government came into office committed to reducing tax reliefs, but in practice the number of reliefs has increased by almost 100.
“HMRC does not effectively monitor changes in the cost of tax reliefs, so is slow in identifying instances where a relief is being exploited for a purpose parliament did not intend,” Hodge said.
The PAC also criticised the Revenue’s unwillingness to introduce a tougher code of conduct for tax professionals, and questioned HMRC’s “cosy” relationship with the Big Four accountancy firms.
“it is disappointing that HMRC has rejected our recommendation for a tougher code of conduct for tax advisers,” Hodge said. “The response is out of kilter with its wider policy to clamp down on aggressive tax avoidance.
“We remain concerned that HMRC’s relationship with these large accountancy firms is too cosy, and it needs to get much tougher in challenging the advice they give to their clients,” she added.
