Tax evader rhetoric 'over the top'
Rhetoric in recent months that tax evaders represent a growing menace to the economy appears to be unravelling, amid figures showing serious cases of tax evasion have sunk to a five-year low.
Data from HM Revenue & Customs covering April 1st 2012 to March 31st 2013 show its officials identified 2,888 suspected cases of serious tax evasion – down 16% on the 3,456 cases they pinpointed in the previous year.
Law firm Pinsent Masons, which obtained the data, said the latest volume of such evasion cases – those with £50,000 or more in tax at stake – was more than a third less than it was at its last peak.
Moreover, the number of people suspected by HMRC of serious tax evasion has declined sharply over the last two years, “ going against the popular notion that tax evasion is on the rise.”
In fact, added the firm, given the figures show that cases of serious tax evasion are less frequent now than at any time since the 2009 tax year, “some of the [recent] speculation about tax evasion is a little over the top.”
Pinsent Masons partner Phil Berwick reflected: “This decline in suspected tax evasion doesn’t tally with the rhetoric from some quarters that the British economy is being undermined by a chronic under-collection of tax revenues.
“HMRC has plenty of tools at its disposal to catch tax evaders which serves as a huge deterrent to those considering tax evasion. A fall in serious tax evasion cases being identified is definitely not down to any waning of HMRC’s determination to pursue tax evasion.”
Rather, the decline is more likely due to people being aware that HMRC has stepped up its anti-evasion efforts and taken advantage of new powers and initiatives, including its ability to impose penalties at 200% of the original tax owed.
The tax authority has also hired 2,500 additional inspectors; leveraged the private sector to improve its anti-evasion strategy – extending to its Connect IT system, and signed anti-evasion treaties with other countries to catch people stashing cash offshore.
“Five years ago some individuals and businesses perhaps felt that evading tax was relatively easy,” said Berwick. “Now they can see that HMRC is much more proactive and better informed than in the past. Increasingly, they are deciding that tax evasion just isn’t worth the risk.”