HMRC must do more to reduce tax fraud and explain more clearly and convincingly to the public how it will do so, the Public Accounts Committee has concluded in its latest report on tackling tax fraud. The Committee’s recommendations include the request for HMRC to set out, by November 2016, its strategy for tackling fraud, and to provide an update within the next 12 months on how effective the Budget measures have been in addressing VAT internet fraud.
The PAC took evidence from HMRC in April, as a follow-up to the report of the National Audit Office in December 2015. The PAC’s report, published on 15 April, noted that the published figures do not substantiate HMRC’s claim to have a good record in tackling tax fraud. HMRC estimates that tax fraud costs the exchequer £16bn annually in lost revenue, which accounts for almost half the overall annual tax gap estimate of £34bn. However, the level of tax fraud as a proportion of all tax liabilities has remained virtually unchanged at around 3% since 2010. Although HMRC has reported year-on-year growth in its compliance yields, the overall tax gap has not reduced significantly. The key conclusions from the report were:
· HMRC’s reporting of its performance in reducing the tax gap is too confusing.
· HMRC has not set out a clear strategy for tackling tax fraud.
· There is a perception that HMRC does not tackle tax fraud by the wealthy.
· HMRC does not know what meeting its target of 1,000 additional prosecutions has achieved.
· HMRC has been slow to respond to the growing risk of VAT fraud by internet traders.
The Committee’s main recommendations are that HMRC:
· should set out in its annual reports the relationship between its compliance yields and changes in the tax gap, and publish this information in a way that everyone can understand;
· should set out its strategy to tackle fraud by November 2016 and identify how much resource is devoted to tackling different tax risks and the corresponding yield in each area of the tax gap;
· must do more to tackle tax fraud and counter the belief that people are getting away with tax evasion, by increasing the number of investigations and prosecutions of wealthy tax evaders and publicising this work;
· should review its prosecutions strategy according to what is the optimum number and mix of people to prosecute and quantify the impact of prosecutions and other counter-measures in deterring evasion; and
· should review the Committee’s previous findings on VAT fraud, identify the size of VAT internet fraud, and update the Committee within the next 12 months on how effective the Budget measures have been in addressing this.
HMRC must do more to reduce tax fraud and explain more clearly and convincingly to the public how it will do so, the Public Accounts Committee has concluded in its latest report on tackling tax fraud. The Committee’s recommendations include the request for HMRC to set out, by November 2016, its strategy for tackling fraud, and to provide an update within the next 12 months on how effective the Budget measures have been in addressing VAT internet fraud.
The PAC took evidence from HMRC in April, as a follow-up to the report of the National Audit Office in December 2015. The PAC’s report, published on 15 April, noted that the published figures do not substantiate HMRC’s claim to have a good record in tackling tax fraud. HMRC estimates that tax fraud costs the exchequer £16bn annually in lost revenue, which accounts for almost half the overall annual tax gap estimate of £34bn. However, the level of tax fraud as a proportion of all tax liabilities has remained virtually unchanged at around 3% since 2010. Although HMRC has reported year-on-year growth in its compliance yields, the overall tax gap has not reduced significantly. The key conclusions from the report were:
· HMRC’s reporting of its performance in reducing the tax gap is too confusing.
· HMRC has not set out a clear strategy for tackling tax fraud.
· There is a perception that HMRC does not tackle tax fraud by the wealthy.
· HMRC does not know what meeting its target of 1,000 additional prosecutions has achieved.
· HMRC has been slow to respond to the growing risk of VAT fraud by internet traders.
The Committee’s main recommendations are that HMRC:
· should set out in its annual reports the relationship between its compliance yields and changes in the tax gap, and publish this information in a way that everyone can understand;
· should set out its strategy to tackle fraud by November 2016 and identify how much resource is devoted to tackling different tax risks and the corresponding yield in each area of the tax gap;
· must do more to tackle tax fraud and counter the belief that people are getting away with tax evasion, by increasing the number of investigations and prosecutions of wealthy tax evaders and publicising this work;
· should review its prosecutions strategy according to what is the optimum number and mix of people to prosecute and quantify the impact of prosecutions and other counter-measures in deterring evasion; and
· should review the Committee’s previous findings on VAT fraud, identify the size of VAT internet fraud, and update the Committee within the next 12 months on how effective the Budget measures have been in addressing this.
