Spending review: £7billion a year to be raised by targeting tax cheats

A new £900million drive will see HMRC investigators “crack down” on offshore bank account holders, it emerged in the Spending Review.

Five times as many people including professionals such as doctors will be prosecuted for tax evasion “as a deterrent to others”, while a “cyber team” will tackle fraud in repayment of money owed.

Large businesses will scrutinised more carefully, and private debt collectors will be called in to help recover lost revenue.

Ministers said the proposals illustrated the fairness of the Government’s approach, as the wealthy will be the targets.

However some commentators questioned whether the hoped-for savings are achievable given that the budget for HMRC – which has been caught up in several high-profile fiascos in recent years – is being cut by 15 per cent.

George Osborne announced in his statement to the Commons on Wedensday: “We will also need to address the situation under the last government where the gap between the taxes owed and the taxes paid grew considerably.

“So in this Spending Review, while the HM Revenue & Customs budget will be expected to find resource savings of 15 per cent through the better use of new technology, greater efficiency and better IT contracts – we will be spending £900 million more on targeting tax evasion and fraud.

“This additional £900 million is expected to help us collect a missing £7 billion in tax revenues.”

Nick Clegg, the Deputy Prime Minister, wrote in a letter to Liberal Democrat activists: “On child benefit, capital gains and tax evasion and avoidance – this government is making the well-off pay their share.”

But Rhian Beynon, a spokesman for the End Child Poverty Campaign, said: “The review fails the challenge of saving the tens of billions lost on tax evasion and does not ask the wealthiest to make a full and fair tax contribution.”

Keith Bannister, head of KPMG’s government risk advisory practice, said: “It’s going to be a massive challenge to reduce fraud, reduce error and claw back lost revenue through tax avoidance. The question is will the £900 million resources budgeted be sufficient to tackle the issue?

“The government can’t deliver this alone and it will need the combined expertise of the public and private sector, by using innovative technology and commercial approaches, such as payment by results.”

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, added: “Cutting HMRC’s budget isn’t good news. HMRC is already struggling on its current resources; remember the tax over/underpayment debacle earlier this autumn? The Treasury is placing a lot of store on closing the tax gap and although £900 million pounds more on combating tax evasion and fraud is a way forward, the test will come with how HMRC’s day to day activities can cope with what is effectively a 15 per cent budget cut.”

Gary Ashford, Head of Tax Risk, Disputes & Investigations at RSM Tenon said: “With today’s announcement we can definitely expect to see some doctors and dentists being arrested following the Tax Health Plan earlier in the year.

“We are already seeing a significant crack down on evasion around complex tax planning.”

The Spending Review document explained that “to ensure deficit reduction is implemented fairly”, the Government will “take further action to combat tax fraud, evasion and avoidance”.

The £900m fund for the HMRC will involve “a five-fold increase in criminal prosecutions to act as a deterrent to others” along with “a new dedicated team of investigators to crack down on offshore evasion”.

There will also be “more resources for the prevention of tobacco and alcohol fraud”, “a cyber team to address repayment fraud” and “dedicated tax experts to extend HMRC’s coverage of large businesses”.

As much as £1bn a year of tax debt will be handed over for “private sector debt collection agencies” to collect, following a successful pilot scheme.

It is hoped that £7bn a year in lost tax revenue from illegal evasion will be brought in by 2014-15, figures that are not included in the total amount of savings the Government wants to make to cut the deficit.

At the same time, HMRC will be expected to make “overall resource savings of 15 per cent” and “efficiency savings of 25 per cent through enhanced use of new technology rationalising the HMRC estate and maximising savings from IT contracts”.

It has already been speculated that anyone earning more than £150,000 a year – the threshold for the new 50 per cent income tax rate – will be investigated to see if they are paying required taxes.

Lie detector tests and voice recognition technology could be used to identify those seeking to mislead inspectors.

source: telegraph.co.uk

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