28 February 2003
Growing use of tools such as offshore bank accounts to avoid paying tax could be costing the Treasury billions of pounds in lost revenue every year. Measures to combat the problem should be taken immediately, the National Audit Office warned this week.
An NAO report on fraud against the Inland Revenue, published on February 28, demands 'continued efforts' to tackle widespread problems.
Other potential sources of fraud highlighted include the scale of the 'shadow economy', including those who do not declare full taxable income, and the continued use of cash transfers by individuals to avoid detection.
Although auditors found it impossible to estimate the total loss to the Treasury, NAO head Sir John Bourn warned: 'Even a small percentage loss to fraud could amount to billions of pounds.'
He highlighted widespread use of offshore accounts by an increasing number of financially aware UK residents and businesses.
The report says that UK banks have helped British nationals to set up accounts in low-tax centres such as the Crown dependencies – Jersey, Guernsey and the Isle of Man. One part of the report refers to branches of a major UK bank that helped customers place cash – later undeclared – in the Isle of Man. It says the Inland Revenue was aware that some of the bank's 'sundry parties accounts' were being used 'to conceal transfers offshore for substantial and systematic tax evasion'.
No charges were ever brought against the bank, which the Revenue refused to name, although several hundred cases of potential tax fraud by individuals are still being investigated.
Yet auditors warned that the Revenue should increase its fraud prosecution activities, taking advantage of new laws, after it emerged that an average of just 45 convictions are brought against individuals annually.
Edward Leigh, chair of the Public Accounts Committee, said: 'Compared with some governments, there is a real dearth of information about the scale and nature of tax fraud against the Inland Revenue.
'It is becoming clear that offshore accounts are a bigger problem than was previously thought. The Revenue must… clamp down on this.'
A spokesman for the department said officials were 'already acting on many of the NAO's recommendations'.
PFfeb2003
