Tax avoiders could be named and shamed under new rules
Government to crack down on tax avoidance schemes like the one used by Jimmy Carr
THE GOVERNMENT is to launch a crackdown on tax avoidance schemes and could force finance companies to 'name and shame' their clients by handing details to the taxman. The reforms, to be announced by treasury minister David Gauke, will be put forward in a consultation document and could lead to changes in the law by the end of next year.
They come in the wake of the row over the tax affairs of comedian Jimmy Carr, which were described as "morally wrong" by the Prime Minister last month. Carr used a technically legal scheme to shelter more than £3m a year from the taxman using a Jersey-based system known as K2.
"The Treasury estimates that 14 per cent of all unpaid tax income is due to aggressive avoidance schemes. Although they are not illegal, ministers are determined to clamp down on them," reports the BBC.
The proposed reforms will allow the Revenue to pursue thousands of people who shelter their wealth by using intermediary companies in Jersey and other tax havens.
The Guardian explained how the new system would work. "Officials often hit a dead end when investigating schemes that are based offshore but, under the proposals, UK promoters will be made to hand over customer databases. That information will be used to formally warn clients about the deals they have signed up to and to work out the amount of tax they would owe if the scheme failed."
An editorial in The Times described the government's initiative as "important and welcome", but warned that the consultation does not go far enough.
"The best way of conducting tax policy is that individuals should feel a sense of compunction about paying a fair share. The beneficiaries of avoidance know that a tax bill of lower than 10 per cent of income is cheating, even though it may be perfectly legal," said the paper.
However, the same paper also suggested the Government's crackdown on tax avoidance is being threatened by a lack of resources at the Revenue. It said there are currently 20,000 unresolved tax disputes backed up in the system.
"Staff cuts, office closures and poor morale stemming from pay freezes and pension cuts are also biting," the paper added.
Labour is sceptical about the changes, according to the Guardian. "One shadow minister said the Tories were so closely associated with tax avoiders they would not have the political will necessary to change the tax system."
Gauke's announcement will come at Policy Exchange, the day after the Mail on Sunday revealed that one of the think tank's trustees, Conservative donor George Robinson, was revealed to have been involved in an aggressive tax avoidance scheme and ordered to pay millions to the government.