3 Tackling Tax Avoidance
10. The Department estimates that its strategy for
addressing tax avoidance has brought in £11 billion of revenue
since 2005 that may otherwise have been foregone.[26]
It also believes that good international cooperation has enabled
it to make more progress in dealing with those who use tax havens.[27]
11. The Department examines each tax to assess the
revenue it ultimately fails to collect as a consequence of taxpayer
non-compliance and the impact of avoidance. The Department also
assesses the nature of this 'tax gap' and the risks it needs to
address.[28] It does
not have an estimate of the total amount of revenue foregone through
the use of avoidance schemes and cannot therefore assess whether
increased use of these schemes has contributed to the recent fall
in revenues.[29]
12. The Disclosure of Tax Avoidance Schemes (DOTAS)
regime, introduced in August 2004, requires promoters of tax avoidance
schemes to register them with the Department.[30]
The disclosure regime applied initially to Income Tax, Corporation
Tax and Capital Gains Tax. For most taxes, users of avoidance
schemes are also required to tell the Department when they use
a registered scheme.[31]
The Department has identified what it believes are the indicators
of avoidance as opposed to acceptable tax planning and publishes
a list of factors that may indicate avoidance, such as transactions
that have little or no economic substance.[32]
There are penalties for failure to register schemes that meet
the Department's criteria for disclosure.[33]
13. The Department uses the information from disclosures
to assess whether avoidance schemes comply with existing legislation
and challenges those schemes it believes do not. Where a scheme
complies with legislation but is not consistent with the intention
of tax policy, the Department considers the case for legislative
action to stop the scheme.[34]
14. We asked the Department about the merits of introducing
a general anti-avoidance rule that would make illegal any scheme
devised just for tax avoidance purposes.[35]
The Department considers that factors such as the ability of the
taxpayer to move their residence or business overseas mean that
introducing an anti-avoidance rule in the UK may not work. The
Department has not evaluated whether it would need fewer people
working to combat avoidance if it were to introduce a general
anti-avoidance rule that was successful.[36]
15. The Department employs 17,000 tax professionals,
but does not know how many staff it has working specifically on
avoidance.[37] It believes
it has enough well trained staff to undertake its anti-avoidance
work and seeks to build its tax expertise through technical training
and exchanges of staff with private sector accountancy firms.[38]
16. The Department acknowledges that it needs more
capability to deal with the increase in evasion, avoidance and
business failure that the economic downturn is likely to bring.[39]
We note its intention to continue to reduce staff numbers and
introduce better targeted risk-based approaches to combat avoidance.[40]
26 Q 58 Back
27
Q 59 Back
28
Qq 62 and 66 Back
29
Qq 60 and 62 Back
30
Q 59; C&AG's Report, para 2.32 Back
31
Q 64 Back
32
Qq 95 and 97 Back
33
Q 96 Back
34
Qq 63 and 65 Back
35
Qq 68-69 Back
36
Q 81 Back
37
Qq 70, 76-77 Back
38
Qq 70 and 78 Back
39
Q 73 Back
40
Qq 76 and 78 Back
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