HM Revenue & Customs needs a properly resourced investigation and prosecution unit staffed by in-house lawyers, according to a Labour party-commissioned report that calls for a radical overhaul of the ‘resource-starved’ tax authority.
The routine hiring of external lawyers to argue its case in courts results in a ‘weak institutional knowledge base’ which inhibits HMRC’s ability to combat tax avoidance and evasion by large corporates, it says.
The report was commissioned by shadow chancellor John McDonnell and written by a panel of 14 experts, including several legal academics.
It also proposes a governance shakeup which would see the agency come under the ‘guidance’ of the Ministry of Justice and/or a panel of retired judges. They would monitor a supervisory board of stakeholders acting as a ‘bulwark against corporate capture’.
To avoid being ‘shackled’ in its pursuit of abuses, the authority ‘must have complete independence from all business interests’, it adds. At present the authority’s board is dominated by people with connections to big business and professional services.
McDonnell said: ‘The public want to urgently see more action on tax avoidance but the government have made things worse by cutting staff and resources at HMRC.
‘This report lends further support to something we have been arguing for years: that HMRC needs more accountability and resources to deal with tax avoidance and evasion.’
The report also calls for a rewrite of 2013 flagship anti-avoidance measure the General Anti-Abuse Rule. Writing in the Guardian, accounting academic Prem Sikka, who led the report team, argued that representatives of large businesses are permitted to design tax laws that could advance their interests.
‘To pursue anyone HMRC needs permission not from a panel of retired judges but from a panel of business people,’ he said. ‘Unsurprisingly, there have been few test cases involving big business.’