The Chief Secretary to the Treasury Danny Alexander has today announced new plans to tackle non compliance in the tax system.
He announced that the Government will make £900 million available over the spending review period to raise additional revenues from those who undermine the tax system and seek to avoid paying their fair share. This should bring in around £7 billion per annum by 2014-15 in additional tax revenues.
This sends a clear signal that the Spending Review will be focused on both fairness and deficit reduction.
More details on HMRC’s final spending review settlement will be set out on 20 October 2010
The £900 million will allow HMRC to further reduce compliance risks by targeting the following areas:
Avoidance & evasion
Making it harder for individuals and companies to avoid tax and working to prevent tax avoidance before it happens. Funding will be available for:
- a more robust criminal deterrent against tax evasion - HMRC will increase the number of criminal prosecutions fivefold
- a crackdown on offshore evasion with the creation of a new dedicated team of investigators to catch those hiding money offshore
- deployment of dedicated tax experts to extend HMRC’s coverage of large businesses, focused on providing resources to tackle high-risk areas.
Reducing the amount of tax that is lost to the Exchequer each year through tax debt. Funding will be available for:
- placing up to £1 billion per year of tax debt out to private sector debt collection agencies
- improving the scope of in-house debt collection
Organised crime and criminal attack is estimated to contribute around £5 billion a year to the UK tax gap. Over the spending review period funding will be available for:
- more registration checks to stop people claiming tax repayments when they are not due
- the creation of bespoke cyber crime teams and specialists to help prevent criminal attack on HMRC’s electronic systems
- more investment in freight and detection technology to prevent alcohol and tobacco smuggling.
The Government has already announced steps to tackle non-compliance at the June Budget, including using debt collection agencies to collect £140 million of additional revenue during the current financial year. This package builds on this. HMRC will begin implementing these proposals immediately, in order to ensure that they are well placed to deliver this ambitious package of measures over the four year period covered by the spending review.
Notes for editors
The fund of £900 million is to be spent over the four year period covered by the Spending Review, i.e. April 2011 to April 2015.
This is not an announcement of HMRC’s overall Spending Review settlement. This will be made on 20 October 2010.
Evasion is estimated to cost the Exchequer approximately £7 billion each year in uncollected tax revenues. Avoidance costs around the same figure. Attacks on the tax system by organised criminals are estimated to cost around £5 billion.
HMRC publishes figures for revenue losses from written off or remitted tax debt in its annual accounts. In 2009-10, revenue losses stood at £6.3 billion.
HMRC has published a detailed evaluation of its successful pilot for the use of private sector debt collection agencies. It is available at http://www.hmrc.gov.uk/about/cap-cap-pilot.pdf
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