Let off the hook: Corporations allowed to avoid billions in tax

The UK tax authorities routinely hold back from chasing multinational corporations for billions of pounds in unpaid taxes, a committee of MPs has found.

While individuals and small businesses are pursued aggressively, large corporations are increasingly allowed to get away without paying their taxes, according to a report by the Public Accounts Committee.

The committee found that HMRC "seems to lose its nerve" when it comes to tackling large scale tax avoiders.

"HMRC holds back from using the full range of sanctions at its disposal. It pursues tax owed by the smaller businesses but seems to lose its nerve when it comes to mounting prosecutions against multinational corporations," committee chair Margaret Hodge said today.

"In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full." 

The committee found that tax authorities are failing to recover billions of pounds in unpaid taxes from Swiss bank accounts.

Last year George Osborne predicted they would recover £3.12 billion from these accounts this year. So far they have recovered just £440 million.

Because of these failures, HMRC collected less in real terms last year than in the previous year.

The gap between what the government actually collected in taxes and what they should have collected grew in 2011-12 to £35 billion.

However, the committee found that this gap fails to take into account the billions more that are lost through aggressive tax avoidance schemes.

They found that tax authorities are failing to calculate how much is lost through such schemes.

They recommend that HMRC pursue more prosecutions of multinational companies in order to test the boundaries of the law.

The report will spark public anger at a time of widespread public sector cuts and when some non-business taxes are rising.

HMRC today rejected the criticisms in the report.

"HMRC strongly disputes the conclusions in the Public Accounts Committee report and challenges the Committee’s selective and misleading use of figures," a spokesperson said.

"HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by Parliament. 

"We have secured more than £50 billion of additional tax from our compliance work since 2010, including £23 billion from large businesses."