HMRC’s Fight Against Tax Dodgers Falls Flat

The British taxman’s attempt to tackle tax evaders with a rule of fear seems to have backfired.

An official report reveals HM Revenue and Customs has failed to reach modest prosecution targets over the past two years and will fail to hit them if the current trend continues for future years.

This is despite a massive £900 million cash injection that helped fund recruiting 240 researchers and investigators, new laws and a concerted media campaign aimed at discouraging tax evasion.

The tax task force has undershot the target by 18% in the 2011 tax year and was running 38% shy in the 2012 tax year, according to figures released in November 2012.

The prosecution figures were disclosed in a report from HM Inspector of Constabulary (HMIC) and from freedom of information inquiries made by a tax consultant.

HMRC Tax Prosecution Targets

Tax year

Target

Achieved

% rate

2011 – 2012

365

302

-18%

2012 – 2013

565

349

-38%

2013 – 2014

765

2014 – 2015

1,165

Source: HMIC and HMRC

HMIC argues the target figures are proving difficult for HMRC to meet.

Flawed investigations

“Even though the Crown Prosecution Service has put resources aside for this work, even if the case load increases to meet the target levels, the CPS will struggle to bring them to court,” said a HMIC spokesman.

The report also alleges that tax inspectors concentrate on disclosure issues rather than gathering evidence to support prosecutions, and that investigators need managers to invest more in training.

Since the last election, the coalition has repeatedly spoken out about a fairer tax system. Ministers have continually blurred the line between legal avoidance and criminal evasion, while hinting that anyone avoiding tax was morally wrong.

Prime Minister David Cameron, Chancellor George Osborne and spokesman for the Treasury and HMRC have toed the policy line.

Although HMRC has had some notable successes in court tackling tax evasion, the problem in increasing the number of prosecutions relates to widening the funnel to find suspected evasion cases to bring to law.

Unachievable targets

Behind every successful prosecution lies a pile of investigations that failed to make the cut for lack of evidence or other reasons.

The figures are also unclear about the type of offences HMRC is prosecuting, with only 24 in 2011 believed to have involved direct tax – which covers income and capital gains.

Tax consultant Guy Smith, who uncovered the HMRC prosecution figures, said: “The study by HMIC suggests that HMRC has the capability to reach the target set for prosecutions despite receiving extra money and employing more staff.

“Prosecuting more than 1,600 people and businesses in 2014 seems unachievable.”

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