The House of Commons Public Accounts Committee has called on HMRC to "name and shame" those who sell or use tax avoidance schemes. The promoters of such schemes are "running rings" around the tax authority, said its chair Rt Hon Margaret Hodge MP (pictured).
The call came in the committee's report of an investigation into marketed tax avoidance schemes, during which evidence was taken from HMRC itself, together with a number of promoters of such schemes.
Margaret Hodge said: "Promoters of 'boutique' tax avoidance schemes like the one brought to our attention by the case of Jimmy Carr, are running rings around HMRC. They create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those intended to encourage investment in British films, and then sign up as many clients as possible, knowing that it will take time for HMRC to change the law and shut the scheme down.
"Their clients can then take advantage of this window of opportunity to make a lot of money at the expense of the taxpayer, while the promoter simply moves on to a new a scheme and repeats the process. It is a game of cat and mouse and HMRC is losing.
She pointed out that the promoters win whether their schemes are effective or not.
"The complexity of tax law creates opportunities for avoidance; there are no penalties to stop people promoting these schemes and HMRC is ineffective in challenging promoters who are deliberately obstructive or deliberately sell schemes they know do not work. Promoters pocket their fees whether their schemes work or not.
"There is also a lack of transparency that makes it very hard to find out who is involved in marketing or using these schemes. HMRC publicises details of schemes that do not work but does not name the promoters or the clients. We have seen how public anger and consumer pressure can influence large companies such as Starbucks to behave more responsibly.
"HMRC should publically name and shame those who sell or use tax avoidance schemes in order to discourage such activity. With at least £5bn lost to tax avoidance each year, HMRC has got to get much more robust in its approach."
Despite rules requiring disclosure, many schemes were simply not being notified to the tax authorities.
"We are also alarmed to hear that promoters are getting off paying fines for not disclosing their schemes by pleading that, in the opinion of a QC, they have a 'reasonable excuse' for non-disclosure," said Ms Hodge. "HMRC is right to explore how to make it more difficult for this tactic to work.
"The number of cases HMRC takes to court is tiny compared to the overall caseload. It must make use of the additional resources it has been given to act much more urgently to investigate and close down new schemes and to bring more cases to court."