PAC ‘disappointed’ as HMRC rejects tougher code of conduct for tax advisers

THE PUBLIC ACCOUNTS COMMITTEE has expressed its “disappointment” with HM Revenue & Customs after the taxman refuted the need for a tougher code of conduct for tax advisers.

In the committee’s final report of session, chairwoman Margaret Hodge (pictured) said the tax authority’s response was “out of kilter with [HMRC’s] wider policy to clamp down on aggressive tax avoidance“.

“Furthermore, we do not believe there are enough prosecutions for tax evasion to act as an effective deterrent to those who break the law,” she said. “As it stands, tax avoidance – and even evasion – can be a risk worth taking.

“HMRC needs to show that it comes down hard on tax cheats and change the perception that it is far too tolerant of these companies and individuals – in contrast to its treatment of small businesses and the majority of the public who pay their taxes through PAYE.”

She added the committee is “not persuaded” that HMRC and the Crown Prosecution Service are doing enough to prosecute serious tax evasion cases.

For its part, HMRC said it was “relentlessly pursuing those who seek to cheat the system”.

“We have shut down marketed avoidance schemes, closed loopholes, secured tough new enforcement powers, and opened up international information exchanges so rich evaders will have no safe havens where they can hide their money.

It added its efforts have yielded £1bn extra investment over this parliament, and have secured more than £100bn in additional revenues in the past five years.

Practitioners did not escape the committee’s ire either as Hodge took stock of the committee’s work over the past five years.

The Big Four, and particularly PwC, were again cited in relation to marketed tax avoidance schemes “on an industrial scale”, adding that the firms’ relationship with HMRC is “too cosy”.

“Our hearings… exposed a tax avoidance industry, comprising many large accountancy firms, tax advisers and lawyers, all of whom are making lucrative business out of designing and selling ways for their clients to avoid tax,” Hodge said.

Over this parliament, the committee has gained a reputation for its no-nonsense, abrasive tone taken with witnesses, most notably Google, Amazon and Starbucks, which it took to task for channelling UK profits offshore to low-tax jurisdictions.

Hodge also called for a simpler tax code, noting “as long as the United Kingdom has such a complex tax code, opportunities for aggressive tax avoidance and evasion will continue to be exploited”.

“This government came into office committed to reducing tax reliefs, but in practice the number of reliefs has increased by almost 100 so that, according to the Office for Tax Simplification, we now have 1,140 tax reliefs.”