Tax officers ‘failing to pursue giant firms’

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Tax authorities have been holding back on using sanctions against multinational companies, while pursuing small businesses and individuals, according to a new parliamentary report.

HM Revenue and Customs seems to “lose its nerve” when faced with the prospect of taking legal action against global giants, and has fallen short on the unpaid tax it hoped to extract from Swiss bank accounts – collecting just £440m so far this financial year, rather than the £3.12bn forecast after a bilateral agreement – said the House of Commons Public Accounts Committee.

Changes in “controlled foreign company” rules and the failure to close a loophole relating to Eurobonds have made it “easier for the companies to avoid tax while ordinary people continue to pay their share,” said the committee’s chairman Margaret Hodge.

In comments which will raise questions over the Treasury’s intention of using a clampdown on tax evasion and avoidance to plug holes in the public finances, the committee noted that the planned income from the Swiss accounts were written into Chancellor George Osborne’s budget estimates in last year’s Autumn Statement and said it was “astonished” at HMRC’s failure to account for the shortfall.

HMRC brought in £475.6bn in revenue for the Government in 2012/13, an increase of £1.4bn or 0.3 per cent in cash terms over the previous year, the report found. But in real terms, after inflation, tax income actually fell last year, compared to 2011/12, while the “tax gap” between the amount owed to the Exchequer and the amount actually collected grew by £1bn to £35bn in 2011/12.

Launching the report, Ms Hodge said: “In pursuing unpaid tax, HMRC has not clearly demonstrated it is on the side of the majority of taxpayers who pay their taxes in full. HMRC aims to make the UK more attractive to business but the incentives to international corporations may enable them to avoid tax.”

Comment: Page 12.