UK tax agency must report full scale of tax avoidance-lawmakers

LONDON (Reuters) - British authorities must start reporting the full scale of aggressive legal tax avoidance and prosecute more people for evading tax by illegally moving money offshore, lawmakers said on Wednesday.

A pedestrian walks past the headquarters of Her Majesty's Revenue and Customs (HMRC) in central London February 13, 2015. REUTERS/Stefan Wermuth

The Public Accounts Committee of Britain’s parliament said the government’s tax agency, HM Revenue and Customs (HMRC), should go much further in its estimates for the tax gap, or the amount of tax uncollected each year.

HMRC put this figure at 34 billion pounds ($52 billion) in the 2012-13 financial year, but the committee said this failed to take into account aggressive tax avoidance schemes that while technically legal, run counter to the spirit of the law.

Tax avoidance and evasion has become a hot political topic in Britain as the country tries to pay off its large budget deficit, still one of the biggest among advanced economies.

Last year, celebrities including Take That pop star Gary Barlow attracted public anger for using tax avoidance schemes, while companies like Starbucks and Amazon have been criticised for avoiding corporation tax despite making billions of pounds of sales in Britain.

In response, HMRC said the committee had overlooked a record haul of tax revenues and the fact it had recruited a 3,000 new staff to improve its service.

It routinely publishes the number of tax avoidance schemes, which has been steadily declining, HMRC said in a statement.

The committee’s report described the number of criminal prosecutions for offshore tax evasion as “woefully inadequate,” with only 11 prosecutions since 2010.

HMRC said it had successfully prosecuted a record 1,200 cases of tax evasion last year, resulting in 407 years of custodial sentences.

Finance minister George Osborne aims to raise an extra 5 billion pounds by clamping down on tax evasion and avoidance. Earlier this year, the government announced new laws to ensure those assisting tax evaders will be open to punishment.

Opposition Labour shadow finance minister John McDonnell has said the annual tax gap now amounts to 120 billion pounds, much of which could be collected if HMRC received more funding.

Reporting by Andy Bruce; Editing by William Schomberg and Tom Heneghan