Britain’s tax agency should “name and shame” promoters and clients of “boutique” tax-avoidance schemes to discourage their use, a panel of lawmakers said.
Sellers of such schemes are exploiting the inability of Her Majesty’s Revenue & Customs to act quickly enough against the use of loopholes in legislation or the abuse of tax reliefs, the House of Commons Public Accounts Committee said in a report published in London today.
“It is a game of cat and mouse and HMRC is losing,” Margaret Hodge, the opposition Labour Party lawmaker who heads the panel, said in an e-mailed statement. “The complexity of tax law creates opportunities for avoidance, there are no penalties to stop people promoting these schemes, and HMRC is ineffective in challenging promoters who are deliberately obstructive or deliberately sell schemes they know do not work.”
The committee urged the tax agency to “get more robust in its approach.” While at least 5 billion pounds ($7.7 billion) were lost to tax avoidance last year, HMRC does not name promoters or clients of schemes that don’t work, even though it publicizes the details, the panel said.
“We have seen how public anger and consumer pressure can influence large companies, such as Starbucks, to behave more responsibly,” Hodge said.
Starbucks Corp. pledged in December to pay a “significant amount” of U.K. corporation tax in 2013 and 2014 “regardless of whether our company is profitable during these years,” after the world’s largest coffee-shop operator was criticized by members of the Public Accounts Committee for not paying any tax for the past three years.
“We are glad the report exposes the practices of promoters who sell tax-avoidance schemes to wealthy individuals,” HMRC said in an e-mailed statement. “We have also already consulted on strengthening the regulations around these schemes.”