Pumping a Dry Well

The government has dismissed recommendations from the Public Accounts Committee over the reporting of HMRC's accounts and the tax gap.

Specifically the government has dismissed the recommendations that HMRC should "be more explicit" about the limitations of the current measure of the tax gap (£35M as per figures released in October 2013) and gather greater intelligence about the value of tax lost through avoidance.

However, both the government and PAC agreed that HMRC had overestimated the yields expected from UK holders of Swiss bank accounts, and that HMRC should pursue these more aggressively.

The government is quoted by Accountancy Age:

"The UK-Swiss agreement is raising revenue that would otherwise largely remain beyond the reach of UK authorities. The department continues to rigorously press the Swiss authorities to understand why receipts are lower than originally expected by either country. 

The department will also make full use of the enhanced exchange of information provisions under the agreement to identify ongoing evasion, and is contacting every person whose details were disclosed under the agreement to ensure that all tax, which should be paid, is paid." 

However, as I noted in July 2013, HMRC is pumping a dry well there:

"The trouble with the ongoing politicisation of tax (or rather the mechanisms involved in collecting tax) is that the politicians and media "professionals" involved in the spin are apt to "overspin" the issues and potential results etc.

Such appears to be the case with the "landmark" tax agreement between the UK and Switzerland, which Osborne heralded last year as:

"The largest tax evasion settlement in British history."

Fast forward to the present day and we see...cough... that it now looks set to raise much less revenue than expected, according to an update from the Swiss Bankers Association (SBA).

Osborne expected to raise £5BN over five years, of which £3.2BN of revenues expected this year have already been included in the government’s borrowing figures.

However, the SBA said in a report last week that it is possible that less than £900M would be directly transferred to the UK. The association said that first indications suggested there were fewer untaxed UK assets in Switzerland than had been previously assumed, largely because many clients have resident non-domiciled status."

Tax does have to be taxing.

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