Monday, September 20, 2010

£900m to tackle tax avoidance and tax evasion

During his speech at the Lib Dem party conference yesterday, Danny Alexander said that:
"Tax avoidance and evasion are unacceptable in the best of times but in today's circumstances it is morally indefensible."
He announced that £900m will be made available for a:
"package of new measures to crackdown on tax avoidance and tax evasion".
Speaking earlier on the BBC's Andrew Marr Show, Nick Clegg criticised Labour for not doing more to clamp down on tax loopholes that he described as
"perfectly legal but morally questionable".
I said last year that I thought the tide was turning. See: Tax cheats need to think again.

Now Danny Alexander has referenced tax avoidance and tax evasion as if they were one and the same activity. And Nick Clegg implicitly referenced legal tax avoidance as being 'morally questionable' and liable to be blocked.

HMRC still has the same desire to introduce anti-avoidance legislation as under the previous Government. The difference now is that they are under even greater pressure to close the 'Tax Gap' and yet they have fewer resources than ever before to do this. But they need to be seen to be clamping down on 'rich' tax avoiders and evaders, to at least the same extent as they clamp down on benefit cheats.
The £900m will apparently include measures such as:
  • a fivefold increase in the number of criminal prosecutions against tax evasion;
  • a crackdown on offshore evasion with the creation of a dedicated team of investigators to catch those hiding money offshore;
  • a much tougher stance on evasion and avoidance by those liable for the 50 per cent tax band;
  • further investment in in-house collection capacity to increase HMRC’s internal debt collection rates; and
  • more registration checks to stop people claiming tax repayments when they are not due.
These are all worthy activities but will the £900m really make a difference in the face of continued cuts? I really hope so but sadly it's far more likely that this is simply a 'spin' story to placate the Lib dem conference. Time will tell.


  1. I posted a comment on the Spending Challenge site, but don't know if it will be taken up.

    The idea is to force banks to run more tax-friendly bank accounts with easy online access to 7 years' statement data in formats that anyone could write software to download automatically.

    Pushing further, banks could be forced to allow customers to tag their receipts & payments by tax category. With data like this, it would be a lot easier to pay tax.

  2. Agreed that there's a massive difference between evasion and avoidance, but tax avoidance/tax planning is only effective if implementation is correct. I suspect that a large amount of tax avoidance would not stand up to closer scrutiny which is not there if HMRC reduce their resources.

    I hope that the £900m will go some way to addressing this so that those of us who advise and ensure that tax planning is undertaken correctly are not undercut by those whose belief is that HMRC will not have the time or inclination to follow it up.