LONDON: David Cameron was confronted in the Commons on Wednesday with figures showing that thousands more government inspectors are employed to tackle benefits fraud than deal with tax evasion by the wealthiest UK residents.
Angus Robertson, the Scottish National party’s leader in Westminster, asked the prime minister why 3,250 department of work and pensions (DWP) staff have been assigned to investigate welfare fraud, while 300 specialise in dealing with the rich.
“Surely we should care equally about people abusing the tax system and those abusing the benefit system?” Robertson asked during prime minister’s questions. “Why has this government had ten times more staff dealing often with the poorest in society abusing benefits than with the super-rich evading their taxes?”
In fact the government confirmed on Wednesday that the ranks of DWP benefits investigators have swelled to 3,700 – a higher number than the one quoted by Robertson, and up from 2,600 in February last year.
That compares with 700 people who work at HM Revenue and Customs in the two units whose job it is to investigate the wealthiest 500,000 people living in the UK.
David Cameron was jeered when he admitted the figures cited by Robertson would need to be examined, but retorted “they sound to me entirely bogus”. He added: “The predominant job of the DWP is to make sure that people receive their benefits. The predominant job of HMRC is to make sure people pay their taxes”.
Benefits fraud costs the government £1.3bn a year, according to official statistics, while the gap between tax owed and tax paid is put at £34bn a year by officials.
MPs on the public accounts committee said this figure fails to take into account the losses to aggressive tax avoidance schemes of the kind previously criticised by the prime minister. Labour puts the tax gap at £120bn. Shadow chancellor John McDonnell has claimed much of the missing revenue could be collected if HMRC had more funding.
However, the government says it is spending an extra £1.3bn on the HMRC, allowing it to acquire more data and invest in more technology and tools. A further £800m is to be spent on more expert analysts and on expanding compliance and fraud investigation teams to tackle tax dodgers more robustly.
A spokesman for HMRC said that it had a total of 26,000 investigators and added that it was “absurd” to regard tax collectors focused on the richest Britons as working in isolation from the department’s thousands of investigators, lawyers and other experts.
“The suggestion that only 300 HMRC people are working against evasion by the wealthy is plain wrong. We have over 26,000 people working right across the range of our enforcement and compliance business focused on stopping tax evasion, avoidance and fraud, day in, day out. The dedicated units referred to are important elements of that work but are far from the sum total.”
Jeremy Corbyn opened prime minister’s questions by attacking the Conservative record on tax, with all six of his questions used to highlight issues raised by the Panama Papers, a leak of 11.5m documents published last week by the Guardian and other media partners around the world. “The number of people out there collecting taxes is important,” said the Labour leader.
HMRC’s “affluent unit”, launched in October 2011, now employs 320 investigators, focusing on individuals with assets of more than £1m and income of more than £150,000 a year.
The tax office’s “high net worth” unit, which has a further 400 investigators , focuses on the estimated 6,200 UK residents worth more than £20m in assets.
Set up under Labour in 2009, the high net worth division advertised its arrival with welcome letters setting out details of how it aimed to provide an “enhanced relationship” with its “customers”.
Its role, according to HMRC’s website, is to “build relationships to better understand these customers and make it easier for them to pay the right amount of tax,” by providing “a single point of contact and a holistic approach to their tax affairs”.
Based on the Australian model, which was said to have raised large sums in additional revenues, the high net worth unit brought in an additional £414m last year, HMRC claims, taking the total since it was created to well over £1bn.
Supporters describe the approach as friendly, but with a “sting in the tail”, while critics claim that the collaborative tone is simply a reflection of the fact that for the super-rich, the amount of tax paid has become to some extent a matter of personal choice.
John Caudwell, the billionaire founder of retailer Phones4U, described the UK tax system last week as “open to be abused”. Reacting to the Panama Papers, Caudwell said the tax rules were “a little bit vague” and there were “grey areas” between acceptable tax reduction and aggressive avoidance.
“What we need is very, very clear guidance from the government as to what tax avoidance will not be tolerated,” he told BBC radio. “You almost need a list of activity that is acceptable like ISAs and everything else being very heavily penalised for incorrect behaviour.”
HMRC has slashed its headcount by half in the decade since the reorganisation that replaced the Inland Revenue, and now employs 56,000 people. With extra government funding from the Summer Budget 2015, HMRC added that it was acquiring more data, investing in more technology and tools, and spending £800m in recruiting more expert analysts.
