Thursday, December 19, 2013

UK Public Accounts Committee delivers damning verdict on Her Majesty's Revenue & Customs

Hot off the press at International Tax Review, this article's title confirms what we've known for a long time: "The PAC verdict on HMRC: UK tax authority failing at its job."

As ITR report: "Today's report from the PAC is the culmination of a year's worth of heated enquiries which began with Google, Amazon and Starbucks tax avoidance scandals."

To give some idea of how wildly wrong things have gone at HMRC, let's begin with the scale of the UK tax gap.  For years HMRC has disputed the tax gap estimate produced by Tax Research UK, which estimates the scale of tax evasion, tax avoidance and uncollected revenue at around £120 billion ($195bn) annually.  This compares with the HMRC estimate of a mere £35 billion ($57bn).  Why such a huge difference?  Well, partly because HMRC doesn't include the use of profits shifting techniques by transnational companies.  HMRC's feeble excuse:
" . . . we cannot prosecute multinational companies for activities that are lawful within the international tax framework and (the PAC) has itself acknowledged that the kinds of international tax planning by large companies that it has reviewed are lawful."
This is beyond pathetic.  The international tax framework in its current state is broken beyond repair, yet even as the OECD tries desparately to put Humpty-Dumpty back together again, all the Queen's horse and all the Queen's men wring their hands impotently and deny there's a problem.

And there's more.  As ITR reports:
"The PAC also criticised HMRC for overestimating how much it could collect from British holders of Swiss bank accounts.  The tax authority has brought in £440 million in the 2013-14 tax year so far, out of an initial estimate of £3.12 billion."
Well, they can't say they weren't warned about the astonishing paucity of the British-Swiss deal: we warned them that pretty much exactly this would happen. 

Given how explicit the carve-outs were, they knew full well how riddled the agreement was with loopholes (we're not prepared to dismiss them as idiots).  Perhaps they signed the deal because the UK government is up to its neck in tax havenry and will do whatever it takes to keep potential allies like Switzerland sweet (not to mention that umpteen members of Britain's ruling class are themselves users of Swiss bank accounts).

Not Britain's finest hour.  Without a functional and independent (from big business) tax authority, the UK will continue to fail to deliver economic and social justice to its citizens.  Read the full ITR article here.

Update 2014: See TJN's new website on corporate tax and on secrecy.


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