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Margaret Hodge on the war path again

2nd Nov 2016
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She may no longer be head of the Public Accounts Committee but Margaret Hodge continues to be a thorn in the side of HMRC.

The MP’s latest jibe, following a National Audit Office investigation initially reported in the Sun and the Daily Mail, accuses those running our taxing authority and the British establishment more widely of being “wimps” when it comes to taking on rich tax evaders.

The main source of her anger is a 380-strong task force charged with bringing down super-rich tax dodgers, but seemingly barely paying for itself.

According to press reports, to date in its seven-year tenure the unit has cost approximately £1000m and there is no firm evidence to prove that additional tax recoveries have justified this outlay.

As the papers and Margaret Hodge point out, after all those years of trying they have only a single prosecution to show for all of that effort, bringing in less than £500,000 from an incredibly unlucky property developer.

Ironically, his downfall resulted from a Swiss list passed to HMRC rather than the investigatory powers of the unit.

One imagines that he could justifiably point to many of his peers and suggest that the Revenue is hardly being even-handed in its approach to those struggling to fill in their tax returns correctly, especially when it comes to income from hidden overseas sources.

The only other criminal prosecution advanced during these seven years was apparently a failure. Without wishing to appear any more cynical than Mrs Hodge, some might feel that if you are only going to bring a prosecution once every 3½ years on average, it should be possible to get a 100% hit rate.

With a tax gap of at least £35bn and quite possibly two or three times that figure, much of it presumably representing underpayments by the constituency for which this unit was set up, the failures seem staggering.

All of this is headline-grabbing stuff. The following quote from the report puts tax avoidance by the superrich into context. “HMRC is investigating risks from high net worth individuals with a potential value of £1.9bn. This figure is an initial estimate of the tax that could be due and covers more than one tax year. £1.1bn of this relates to the use of marketed avoidance schemes; around 15% of high net worth individuals have used at least one scheme. HMRC has identified that the risks from high net worth individuals relate primarily to tax avoidance and the legal interpretation of complex tax issues, rather than tax evasion.”

With the first Autumn Statement from new Chancellor of the Exchequer, Philip Hammond, only three weeks away and question marks over his ability to balance the books, it will be fascinating to see what happens both to this unit and HMRC more generally over the next year or two.

It comes as no pleasure to spend so much time bashing HMRC over the head for failures that quite probably result from underfunding and low morale. But somebody really does need to take responsibility for failures to recover much more substantial chunks of the tens of billions of pounds that we are all owed as honest, respectable taxpayers, who contribute our fair share to the national wealth.

Jane Ellison, Financial Secretary to the Treasury is reported as saying, “It has been too easy for people to hide their money.” Perhaps one might politely suggest that she and her colleagues make it a little harder in future?

Replies (5)

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By RobertD
02nd Nov 2016 16:03

HMRC would rather pick on small businesses with a turnover of £11k and dress MTD up as something beneficial. Bullying culture reaches outside the walls of HMRC offices.

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By Chaztax
02nd Nov 2016 19:27

Good article.

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By N.Krishnaswamy
04th Nov 2016 12:59

This is a common phenomenon throughout the world. Rich people can afford to evade tax by hobnobbing with politicians.

Mr. Mallya, a liquor baron of India is in UK or somewhere out of the reach of supreme court of India.
In another case, a straight forward tax officer caught tax evasion of another liquor baron in India by sale and leaseback of assets. When the tax officer wanted to take action, he was immediately transferred to some other post. That is how tax evasion is carried out universally in all countries owing to human failure/frailty towards rich persons by the government mach
inery

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By Lords
04th Nov 2016 17:30

Lay Rothschild is not beyond a bit of tax avoidance.
See her family company.

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By Lords
04th Nov 2016 17:30

Lay Rothschild is not beyond a bit of tax avoidance.
See her family company.

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