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HMRC Has Made Disappointing Progress in Tackling Tax Fraud - It Must Step Up Its Game

15/04/2016 00:01 | Updated 15 April 2016

This week there's been much in the news about the leaked information about individuals and companies using secretive tax avoidance vehicles in Panama.

The Public Accounts Committee, which I chair, will be asking HMRC to tell us where this huge paper trail may lead when top tax officials come before the committee in June.

But closer to home there's a prize to grab with the £16billion of tax lost every year in the UK to fraud and criminal activity. One of the ways the PAC measures HMRC's performance is to look at progress in reducing the tax gap in the UK (that's the difference between tax owed and tax paid).

So in our report, published today, we highlight our disappointment that HMRC has made little progress in tackling fraud - which accounts for half of the total tax gap - over the last five years.

In that time the level of tax fraud losses have remained relatively constant at around 3% of all tax liabilities.

So we are calling for HMRC to have a clearer strategy - it needs to better evaluate what works and what does not and do more of what will catch and deter those who seek to wilfully, and illegally, evade tax.

It also needs to provide clearer information about its performance. It's part of our role on the PAC to dig through the data on performance - but even we found the way it reports performance confusing.

It's long been a concern of the Public Accounts Committee that there are too few prosecutions for tax fraud. HMRC acknowledges that it needs to send the clear signal that anyone who evades tax runs the risk of prosecution. We believe that for prosecution to be a deterrent the threat of fraudsters being prosecuted has to be real or it fuels the widespread perception that the wealthy can, and do, evade tax.

We are heartened that there is more funding being provided for investigations so that it will be able to investigate 100 wealthy individuals a year by 2020 - up from 35 today. While welcome it suggests that, with the right resources, there is more HMRC could be doing to investigate, deter and catch tax cheats today. And catching the guilty does mean it needs to understand clearly where to start looking.

In 2013 the committee repeatedly raised concerns about the growth of VAT fraud by on-line traders - where the seller avoids paying UK VAT on sales to UK consumers. HMRC could not give us an estimate of the scale of this problem but we welcome measures in this year's Budget which set out to try and tackle this type of fraud and we will be holding HMRC to account for progress.

Most people sweating over their tax returns will be worried about whether they've made a minor mistake. They need to know that HMRC is actively pursuing those who wilfully don't pay their dues. On the evidence we saw HMRC's new top team need to step up their game.

Meg Hillier is the Labour and Co-operative MP for Hackney South and Shoreditch, and chair of the public accounts committee

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