The distinction between legal tax avoidance and illegal evasion is 'a myth' an all-party group of MPs says in its latest attack on the 'tax industry'. In a report published today,  the All-Party Parliamentary Group for Anti-Corruption & Responsible Tax and thinktank TaxWatch state that tax avoidance could and should be prosecuted as tax fraud.

The paper recommends that HMRC use existing criminal law 'to prosecute the advisers behind the most aggressive tax avoidance schemes'.

Former goverment minister Dame Margaret Hodge MP, chair of the group, said: 'The myth that tax avoidance is legal and tax evasion is illegal is a false distinction which is reinforced by the tax industry and HMRC’s feeble approach to enforcement. Our bold new paper attempts to explode these myths and recommends that HMRC should be enforcing existing criminal law by prosecuting the enablers of the most aggressive tax avoidance. HMRC should be enforcing the laws of the land, not the rules of the “tax fraud game” that let tax avoiders and their enablers off the hook.' 

Margaret Hodge

Former goverment minister Dame Margaret Hodge MP

Source: Rex

The report argues that much that is claimed to be tax avoidance is in fact criminal fraud. 'The relevant criminal offence – "cheating the public revenue" – is extremely wide and could include tax avoiders and the advisers that devise, market and enable tax avoidance schemes,' the report states.

It alleges that HMRC prioritises cases where there is clear 'active deception' such as falsified documents. 'Because of this, tax advisers know they can recommend ineffective tax avoidance schemes with impunity, provided they comply the notional "rules of the game" by making a cursory effort to present it as legal, with no "active" deception or concealment.'

Meanwhile HMRC 'cannot keep up with better-resourced lawyers and accountants concocting potentially fraudulent avoidance schemes for their clients, and so many succeed without so much as a second glance'. 

'We need a real deterrent to stop bad behaviour or these tax cheats will continue to flout the rules,' said Hodge.

The veteran Labour MP, who served as a minister in the Blair and Brown governments, is a prominent member of the public bill committee currently scrutinising the Economic Crime and Transparency Bill.

 

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