The tax officials have been under pressure to release estimated figures about offshore taxes avoided, after they withheld the information from a report that was published during the campaign.
Lucy Frazer, the then Financial Secretary to the Treasury in June 2022, promised that HM Revenue and Customs would publish figures about the offshore tax gap, but the release has been repeatedly postponed. HMRC published a report on 20th June, four weeks after elections were called. The report estimated that the tax gap for 2022-23 would be £39.8bn. The tax gap is calculated as the difference between what should have been collected and the actual amount paid.
HMRC withheld a breakdown of figures for “non-compliance” by UK residents who failed to declare their overseas income. HMRC officials decided that “another breakdown of the tax gap” should not be made public during the election period, in accordance with civil servants’ guidelines.
The election guidance for civil servants states that statistical activities must “avoid competing with parliamentary candidates to attract the attention of the general public”.
TaxWatch, an investigative think-tank, has challenged the decision to withhold estimated figures. TaxWatch argues that, if HMRC had decided it would be too controversial to release the offshore tax gap numbers, then the publication of other tax gap statistics should have also been delayed.
Claire Aston of TaxWatch said that the main political parties had pledged to close the tax gap in their election manifestos. These figures shouldn’t have been withheld.
HMRC is under pressure to estimate how much tax the UK will owe after figures revealed by HMRC to Tax Policy Associates, an independent think tank in September 2021 that UK taxpayers hold nearly £570bn (£570bn) in tax havens. Officials at the time said that they had not produced any estimates for the amount of foreign accounts that weren’t properly disclosed.
The OECD approved a common reporting standard in 2014. This allows for the automatic exchange of information about financial transactions between countries. HMRC officials have benefited from the standard that requires nearly all UK residents who hold overseas bank accounts to report their balances and interest to HMRC annually.
Steven Porter, the head of tax disputes at Pinsent Masons and investigator of offshore tax avoidance, expressed his doubts that the “pot of golden gold” would come from the practice after tougher penalties were introduced and voluntary disclosures became more publicized. Porter said, “They might be individuals who stubbornly have their heads in the sand but I think that they are a declining breed.”
He said that there could be “legacy” schemes of offshore tax avoidance, but expected HMRC to have identified most of them. He said that the estimated total gross tax gap of individuals who filed self-assessment returns was around £2bn. The offshore tax gap is likely to be only a small proportion.
Labour stated that they would raise more than £5.2bn (£5.29bn) by 2028/29, by closing tax avoidance loopholes and reducing the number of people who have non-domicile status.
The Chartered Institute of Taxation said that although the tax gap – which was 4.8% of UK theoretical tax liabilities in 2022-2023 – can be reduced, further marginal gains are unlikely to be achieved. The Chartered Institute of Taxation points out that revenue lost in 2022-23 due to tax avoidance was £1.8bn or 0.2% total theoretical liability. In a briefing held last month, it said: “Ambitious goals are to be commended but our advice to all politicians is to not spend the money until it has been collected.”
HMRC’s spokesperson stated: “We have an excellent track record when it comes to tackling non-compliance offshore.” Since the launch in 2019 of our No Safe Havens Strategy, we have raised almost £700m through offshore initiatives.
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