The Commons Public Accounts Committee’s review of HMRC will be extended to examine ‘loopholes’ featured in a series of articles published in The Times, which declared in a leading article last Thursday that tax avoidance was ‘a form of cheating’ and ‘a way of playing the system to gain reward that has not genuinely been earned’.
‘It is time to end the gaming of the tax system. Ordinary people are taxed on their income and expected to pay it; wealthy people are taxed [at] higher rates on their much higher incomes and invited to avoid it. This avoidance damages society,’ the leader said.
Margaret Hodge, chairman of the PAC, said some of the practices highlighted by the newspaper – in a series titled Secrets of the tax avoiders – ‘would not look out of place in a banana republic’.
Writing in today’s Times, she said: ‘If the wealthiest pay as little as 1% tax, and corporations even less, that is an offence against the values and sense of fairness of ordinary people. Our tax system encourages morally repugnant behaviour. It must change.’
Hodge also argued for greater transparency surrounding tax disputes between HMRC and large companies.
The Times series featured some schemes known to have been targeted by HMRC. But the paper reported that some ‘leading accountants’ suggested that practices condemned by David Cameron as ‘straightforward tax avoidance’ would include some ‘legitimate’ arrangements.
While there has been little reaction to the series so far from tax professionals, the government’s formal consultation on a general anti-abuse rule (GAAR) – launched earlier this month – prompted two leading experts to give qualified support to a GAAR designed to stamp out artificial schemes.
Patrick Stevens, President of the Chartered Institute of Taxation, said on 12 June: ‘The government is right to be proposing a narrowly-targeted GAAR aimed at truly artificial schemes, as recommended by Graham Aaronson.’
On the same day Bill Dodwell, Head of Tax Policy at Deloitte, said in a press release: ‘Abusive tax schemes bring the tax system into disrepute. A range of approaches to cut out tax avoidance is best.’
PKF noted on Thursday that an avoidance scheme ‘K2’, used by the comedian Jimmy Carr and others, would be under investigation by HMRC. The proposed GAAR would enable HMRC to counteract schemes that ‘work but are perceived as abusive’, the firm said.
Although some critics argue that the proposed GAAR is too narrow, John Cassidy, Tax Partner with PKF, said the kind of publicity surrounding Carr had made it ‘easy for the government to argue that the GAAR is justified to make sure that everyone pays their fair share of tax’.
The Times reported on Friday that Carr used Twitter to apologise for a ‘terrible error of judgment’.
‘Mr Carr said that he had abandoned his participation in the K2 scheme ... and pledged to conduct his finances with “much more responsibility” in the future,’ it said.
David Cameron had said, in response to questions about Carr’s tax affairs, that some avoidance schemes were ‘morally wrong’.
The Times quoted the Prime Minister as saying: ‘The government is acting by looking at a general anti-avoidance law but we do need to make progress on this. It is not fair on hard-working people who do the right thing and pay their taxes to see these sorts of scams taking place.’
The controversy prompted renewed calls for simpler and flatter taxes. Writing in the Daily Telegraph, Conservative MEP Daniel Hannan said: ‘A flat tax renders Jimmy Carr-style ingenuity purposeless: when all rates are the same, there is no advantage in reclassifying income. More to the point, flatter taxes boost the economy.’
Dominic Lawson wrote in a column for the Sunday Times: ‘Unfortunately, rather than address the fundamental issue (that we need a much simpler and flatter tax system, in place of a hopelessly complicated edifice that positively encourages ingenious fiddling beyond the wit of the Revenue to keep in check) the coalition’s leaders have gone for the much easier target: the unlovable Mr Carr.’
He added: ‘I have some sympathy for the predicament of Carr, condemned by a Prime Minister who days earlier had called on wealthy French to come here to avoid the taxes of their own newly elected government, and by a coalition happy also to continue Britain’s role as a tax haven for oligarchs of all nations.’
Hodge, whose committee will hear further evidence from senior HMRC officials on Wednesday regarding the settlement of tax disputes with large companies, noted that ‘the vexed issue of how HMRC deals with disputes with major corporations such as Goldman Sachs and Vodafone’ would return.
She wrote: ‘While the [National Audit Office found earlier this month] the settlements in [five large] cases to be not unreasonable, it remains the case that big companies are let off millions of pounds in interest payments while small businesses are fiercely pursued for every penny ...
‘We should rip off the shroud of secrecy. There is a strong case for the tax affairs of publicly quoted companies to be opened to public account so that we know about their negotiations with HMRC and don’t just see the final settlement in the company’s accounts.’
Responding to the NAO’s report on large tax disputes, Hodge said in a statement on 14 June that confirmed 'my committee’s concerns about the uncontrolled way that HMRC has been doing secret deals with large companies’.
But the NAO had said the overall outcome of the five settlements for the Exchequer was ‘good’, while concerns about the processes by which the settlements were reached had been ‘confirmed’.
The Commons Public Accounts Committee’s review of HMRC will be extended to examine ‘loopholes’ featured in a series of articles published in The Times, which declared in a leading article last Thursday that tax avoidance was ‘a form of cheating’ and ‘a way of playing the system to gain reward that has not genuinely been earned’.
‘It is time to end the gaming of the tax system. Ordinary people are taxed on their income and expected to pay it; wealthy people are taxed [at] higher rates on their much higher incomes and invited to avoid it. This avoidance damages society,’ the leader said.
Margaret Hodge, chairman of the PAC, said some of the practices highlighted by the newspaper – in a series titled Secrets of the tax avoiders – ‘would not look out of place in a banana republic’.
Writing in today’s Times, she said: ‘If the wealthiest pay as little as 1% tax, and corporations even less, that is an offence against the values and sense of fairness of ordinary people. Our tax system encourages morally repugnant behaviour. It must change.’
Hodge also argued for greater transparency surrounding tax disputes between HMRC and large companies.
The Times series featured some schemes known to have been targeted by HMRC. But the paper reported that some ‘leading accountants’ suggested that practices condemned by David Cameron as ‘straightforward tax avoidance’ would include some ‘legitimate’ arrangements.
While there has been little reaction to the series so far from tax professionals, the government’s formal consultation on a general anti-abuse rule (GAAR) – launched earlier this month – prompted two leading experts to give qualified support to a GAAR designed to stamp out artificial schemes.
Patrick Stevens, President of the Chartered Institute of Taxation, said on 12 June: ‘The government is right to be proposing a narrowly-targeted GAAR aimed at truly artificial schemes, as recommended by Graham Aaronson.’
On the same day Bill Dodwell, Head of Tax Policy at Deloitte, said in a press release: ‘Abusive tax schemes bring the tax system into disrepute. A range of approaches to cut out tax avoidance is best.’
PKF noted on Thursday that an avoidance scheme ‘K2’, used by the comedian Jimmy Carr and others, would be under investigation by HMRC. The proposed GAAR would enable HMRC to counteract schemes that ‘work but are perceived as abusive’, the firm said.
Although some critics argue that the proposed GAAR is too narrow, John Cassidy, Tax Partner with PKF, said the kind of publicity surrounding Carr had made it ‘easy for the government to argue that the GAAR is justified to make sure that everyone pays their fair share of tax’.
The Times reported on Friday that Carr used Twitter to apologise for a ‘terrible error of judgment’.
‘Mr Carr said that he had abandoned his participation in the K2 scheme ... and pledged to conduct his finances with “much more responsibility” in the future,’ it said.
David Cameron had said, in response to questions about Carr’s tax affairs, that some avoidance schemes were ‘morally wrong’.
The Times quoted the Prime Minister as saying: ‘The government is acting by looking at a general anti-avoidance law but we do need to make progress on this. It is not fair on hard-working people who do the right thing and pay their taxes to see these sorts of scams taking place.’
The controversy prompted renewed calls for simpler and flatter taxes. Writing in the Daily Telegraph, Conservative MEP Daniel Hannan said: ‘A flat tax renders Jimmy Carr-style ingenuity purposeless: when all rates are the same, there is no advantage in reclassifying income. More to the point, flatter taxes boost the economy.’
Dominic Lawson wrote in a column for the Sunday Times: ‘Unfortunately, rather than address the fundamental issue (that we need a much simpler and flatter tax system, in place of a hopelessly complicated edifice that positively encourages ingenious fiddling beyond the wit of the Revenue to keep in check) the coalition’s leaders have gone for the much easier target: the unlovable Mr Carr.’
He added: ‘I have some sympathy for the predicament of Carr, condemned by a Prime Minister who days earlier had called on wealthy French to come here to avoid the taxes of their own newly elected government, and by a coalition happy also to continue Britain’s role as a tax haven for oligarchs of all nations.’
Hodge, whose committee will hear further evidence from senior HMRC officials on Wednesday regarding the settlement of tax disputes with large companies, noted that ‘the vexed issue of how HMRC deals with disputes with major corporations such as Goldman Sachs and Vodafone’ would return.
She wrote: ‘While the [National Audit Office found earlier this month] the settlements in [five large] cases to be not unreasonable, it remains the case that big companies are let off millions of pounds in interest payments while small businesses are fiercely pursued for every penny ...
‘We should rip off the shroud of secrecy. There is a strong case for the tax affairs of publicly quoted companies to be opened to public account so that we know about their negotiations with HMRC and don’t just see the final settlement in the company’s accounts.’
Responding to the NAO’s report on large tax disputes, Hodge said in a statement on 14 June that confirmed 'my committee’s concerns about the uncontrolled way that HMRC has been doing secret deals with large companies’.
But the NAO had said the overall outcome of the five settlements for the Exchequer was ‘good’, while concerns about the processes by which the settlements were reached had been ‘confirmed’.
