Taxman denies ‘failure’ to curb tax avoidance

MPs on the Commons public accounts committee said the tax collector was failing to pursue global giants as hard as it would individuals or small businesses which did not pay their share of tax.

They voiced public concern that companies like Apple, Google or Amazon could pay only a tiny fraction of their UK profits in corporation tax – or, in the case of coffee-shop chain Starbucks, no corporation tax at all over three years.

“It smells, and it doesn’t smell of coffee,” said Conservative MP Richard Bacon. “It smells bad.”

There’s a mood of anger out there and huge frustration that ordinary people and small businesses feel that they are hassled by you…whereas if you are a big corporation you might be invited in for a cup of coffee. Margaret Hodge, public accounts committee chair

HMRC estimates that there was a “tax gap” of £32bn in 2010/11 between the amount owed and the amount collected – 6.7 per cent of total tax liabilities.

But Mr Bacon told HMRC chief executive Lin Homer: “There is an enormous gap, and the biggest gap is in your credibility.”

The committee’s Labour chair, Margaret Hodge MP, told Ms Homer that the figures were “deeply disappointing” and suggested HMRC was “failing to get a grip on tax avoidance”.

“There’s a mood of anger out there and huge frustration that ordinary people and small businesses feel that they are hassled by you and if they don’t pay their tax someone will quickly come and… get the money from them, whereas if you are a big corporation you might be invited in for a cup of coffee at HMRC,” said Ms Hodge.

Read more: Starbucks ‘paid no income tax’ since 2009

Competitive tax system

Ms Homer denied that the HMRC was giving these companies an easy ride, or that tax avoidance was on the increase.

In its defence, the HMRC blamed government policy for the proportion of tax paid by companies. “Successive governments have wanted the UK to be competitive in the global tax system,” said Ms Homer. “We apply the rules fairly across the piece. We pursue the tax which is owing. There is one system and it applies to all.”

Ms Homer declined to discuss the cases of individual companies, but said that HMRC was happy with the way it dealt with so-called “transfer pricing” arrangements under which different arms of the same company – sometimes in different countries – pay one another for services.

“We believe that the big organisations in this country are not utilising what you might regard as the egregious tax systems to a growing extent. We believe we have made significant progress in ensuring that the most senior people in the big businesses take tax seriously.”

Consumer action

Ms Homer said that consumers can play a role in shaming companies into paying their fair share of tax, adding that the HMRC is beginning to see some evidence to suggest that taxpayer opinion is shaping the behaviour of some firms.

HMRC tax assurance commissioner Edward Troup told the committee that the tax authorities had successfully taken legal action against large companies including Glaxo, Axa, Carlsberg, PA Holdings and Pendragon in recent years.