UK MPs say that avoiding taxes should be treated as fraud

A UK parliamentary committee and TaxWatch have issued a paper stating that aggressive tax avoidance should be considered tax fraud.

Today, October 26, the All-Party Parliamentary Group for Anti-Corruption & Responsible Tax and TaxWatch released a report that criticises HM Revenue and Customs and calls for reform.

Alex Dunnagan, acting director of TaxWatch in the United Kingdom, claimed that the distinction between tax evasion and tax avoidance had caused "unfathomable harm" to the UK tax system.

“Pursuing tax avoidance as a civil matter when there has clearly been fraudulent behaviour does not act as a deterrent,” he said. “HMRC should pursue tax fraud for what it is – a crime. Laws already exist to prosecute those committing tax fraud. HMRC should use them.”

The APPG-TaxWatch research claims that in some instances, tax avoidance is criminal tax fraud and refers to "cheating the public money" as a broader category than tax evasion. If applicable, this group could contain both tax consultants and their clients.

The APPG on Anti-Corruption & Responsible Tax is chaired by Barking Labour Member of Parliament Margaret Hodge.

“HMRC should be enforcing the laws of the land, not the rules of the ‘tax fraud game’ that let tax avoiders and their enablers off the hook,” she said.

“We need a real deterrent to stop bad behaviour or these tax cheats will continue to flout the rules while most taxpayers struggle with the cost-of-living crisis,” she added.

Hodge stated that HMRC should prosecute tax advisors who facilitate the most aggressive tax avoidance schemes. Currently, the department investigates tax evasion cases involving "active deceit."

This may involve concealing information or forging official documents. The cross-party panel criticised HMRC for its "weak approach to enforcement," but acknowledged that the British tax authority lacks the capacity to combat every tax avoidance plan.

“Tax lies at the heart of the social contract,” said Hodge. “During this time of crisis after crisis, it has seldom been more important for our country to come together and pull in the same direction – toward security and prosperity for all.

“Any person or company that attempts to dodge paying their fair share – the tax avoiders and evaders – should be met with the full force of the law,” she argued.

The paper states that tax consultants can make suggestions that comply with UK tax law so long as there is no "active deceit," which decreases the deterrent to tax evasion. The All-Party Parliamentary Group (APPG) and TaxWatch support a policy change to strengthen oversight of "unscrupulous promoters and advisers."

A HMRC spokesperson told ITR: “HMRC is committed to tackling tax avoidance schemes targeted at individuals and the amount lost through them has fallen by two thirds since 2013/14.

“We continue to make it harder for promoters to sell tax avoidance schemes and to reduce demand – stepping up our efforts to warn individuals about the risks of being drawn into avoidance and helping them to get out of a scheme once they realise that they might be caught up in one.”

If the APPG-TaxWatch study gains traction, UK businesses can anticipate heightened examination of tax concerns, and tax consultants may find themselves in the firing line.

By fLEXI tEAM