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Hodge calls for public register of users of aggressive tax avoidance schemes

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People who use tax avoidance schemes disclosed to HMRC under the ‘DOTAS’ regime should be named on a public register, according to the chairman of the Public Accounts Committee.

Aggressive schemes identified by The Times would have ‘a lot fewer members’ if their names were public, Margaret Hodge told the newspaper. ‘A register would offer potential tax avoiders the choice: enter the scheme, pay less and be named, or reject it and keep your confidentiality.’

A leading article in The Times on Friday noted that people who shelter income through a Jersey-based tax avoidance scheme ‘do so safe in the knowledge that there is no public record of who has put money in or how much’.

It added: ‘Indeed, they are doubly protected: even if HMRC investigates the scheme and finds it to be abusive, HMRC officials may reclaim the lost tax revenue but are largely bound by law from disclosing the identity of the avoider. It is an oddity of the system that Jersey, a Crown dependency, not only serves as a tax haven but provides anonymity to tax avoiders …’

Today the newspaper reported that Hodge ‘said a “tax offenders’ register” (sic) would deter people from entering artificial, albeit legal, tax schemes’. Readers commenting on The Times website pointed out that tax avoidance is legal. One said: ‘The idea of naming and shaming people who have committed no crime is as disgraceful as it is disgusting. If the law isn't right, change the law.’

Hodge was speaking after The Times named some of the 2,000 people alleged to have invested in an ‘aggressive’, Jersey-based tax avoidance scheme called Liberty, which ‘sheltered £1.2bn from the Treasury’.

HMRC has challenged the scheme, which was ‘shut down’ in 2008, but a tribunal hearing will not be held until next spring, the paper reported.

Times journalist Alexi Mostrous wrote: ‘While the [proposed] general anti-avoidance rule (GAAR) may close some aggressive schemes, it will not expose those who use them, or reveal the intricate workings of a particular scheme. An investor in an offshore tax scheme will still have his identity protected by both the Revenue and the tax haven. It is against this backdrop that The Times’s exposure of such schemes … is set. The British tax system offers the public no means of discovering who indulges in aggressive avoidance, an industry costing the country billions of pounds a year.’

A consultation on measures to strengthen the disclosure of tax avoidance scheme (DOTAS) rules closes on 15 October. Additional ‘client list’ reporting obligations to help HMRC identify end users of schemes are among the options being considered.

Commenting on the consultation, Heather Self, a director at Pinsent Masons, said in August that ‘even without powers to “name and shame” tax avoiders being given to HMRC, strict taxpayer confidentiality is no longer guaranteed given the level of public disquiet’.

Patrick Stevens, president of the Chartered Institute of Taxation, said the vast majority of tax advisers and their clients should have nothing to fear about the proposals, providing they were properly targeted.