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Committee criticises HMRC ahead of PM’s G8 tax speech

Photo of Rt Hon Margaret Hodge MP for Your Expert Witness storyPrime Minister David Cameron’s announcement of agreement by the Crown Dependencies to act on tax avoidance on 15 June followed publication of a report by the Public Accounts committee criticising HMRC for a lack of robustness on the issue.

In its report, which included criticism of a number of multinational companies – including Google – for their tax arrangements, the committee concluded that HMRC had not been “sufficiently challenging of multinationals’ manifestly artificial tax structures”.

The committee’s chair, Rt Hon Margaret Hodge MP (pictured), said: ““The Government clearly needs to act to strengthen HMRC and to simplify the tax code so that there are fewer loopholes. The Government should also consider greater transparency so that the public knows whether companies are paying a fair share. It should toughen up its proposals on public procurement to deny contracts to aggressive tax avoiders.

“The Government has declared that it will use its presidency of the G8 to promote the tackling of aggressive tax avoidance. This is a welcome recognition of the need for multilateral action to thwart the tax dodgers.

“This committee has vigorously condemned the activities of the big UK accountancy firms in helping their clients find loopholes in legislation and establish highly artificial tax structures.  These firms must recognize that the public mood on tax avoidance has changed and that the time has come for them to advise their clients responsibly.”

The report recognised that HMRC was restricted by limited resources but described its response as “extraordinary”.

“While we are concerned about HMRC’s effectiveness in tackling tax avoidance, we also acknowledge that it has to operate within the constraints of complicated UK tax laws and international tax treaties.  As we have reported before, it is far too easy for companies to exploit the rules and set up structures in low-tax jurisdictions, rather than pay tax where they actually conduct their business and sell their goods and services.”

The report pre-empted the PM’s call for international action to tackle tax avoidance.

It recommended that: “HMRC and HM Treasury should push for an international commitment to improve tax transparency, including by developing specific proposals to improve the quality and credibility of public information about companies’ tax affairs, and use that to information to collect a fair share of tax from profits generated in each country. This data should include full information from companies’ based in tax havens.”

In his speech prior to the G8 Summit in Northern Ireland, Mr Cameron said: “Personally, I would hope the whole world will move towards public registers of beneficial ownership, but I want to maximise the leverage that the UK has got over others in terms of each step in turn.”

Last Updated on Sunday, 16 June 2013 10:47