HMRC to release UK offshore tax avoidance estimates

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The UK Revenue Authority has announced plans to publish estimates of the amount of tax evaded by UK residents holding money overseas, a statistic which experts say could shed light on a key tax issue in tax policy.

In response to a parliamentary question this week, Lucy Frazer, the Treasury’s financial secretary, said HM Revenue & Customs planned to calculate and publish “a new stand-alone offshore tax gap” in 2023 which estimates the amount of evasion and UK tax evasion. taxpayers with assets abroad.

Frazer’s comments follow a response in May to a Freedom of Information (FOI) request which revealed that UK residents had £850bn in overseas financial accounts – including £570bn of pounds were based in tax havens – in 2019, but he had not used the information to estimate the scale of tax avoidance.

The figures come from financial data shared with HMRC by more than 100 countries since 2017, in line with international rules known as the Common Reporting Standard (CRS).

HMRC has come under fire this year for failing to estimate what proportion of foreign financial accounts have been “correctly disclosed”.

“This is perhaps the most important tax public policy question: how much offshore tax avoidance is there?” said Dan Neidle, founder of the Tax Policy Associates think tank, which sent the freedom of information request to HMRC.

“In the early 2010s, there were estimates of billions of dollars of undeclared and untaxed wealth overseas,” he said, adding that since the introduction of automatic cross-border reporting in 2017 in Under the CRS, offshore tax evasion has become “much more difficult”.

“What we haven’t seen is a big jump in tax revenue as those trillions of dollars are uncovered in the text,” Neidle said.

He suggested a range of reasons for this, including: the estimates were wrong, the estimates were correct but undeclared accounts have been moved elsewhere, and large volumes of undeclared funds are still in offshore accounts.

“CRS has provided HMRC with huge amounts of data on assets and income outside the UK, but until now it was unclear whether HMRC was already aware of most of these cases. , or if he had the appetite or the ability to verify,” said John Barnett, chairman. of the Policy and Oversight Technical Committee of the Chartered Institute of Taxation.

“It now looks like we will soon have a better idea of ​​the scale of offshore evasion than we had before,” he added.

HMRC insisted the decision to publish an offshore tax gap was not the result of the freedom of information request. “It was scheduled for the 2022 edition of Measuring Tax Gap, but due to the pandemic and delays in completing cases from the random survey program, results were not available on time,” said l ‘authority.

Arun Advani, assistant professor at the University of Warwick, said HMRC’s decision to estimate the offshore tax gap was “great news”.

“An accurate estimate of the offshore tax gap will require HMRC to match CRS data with personal income tax data. This will also facilitate the use of data for enforcement purposes, systematically detecting inconsistencies between individual declarations and data declared abroad,” he added.

Alex Cobham, chief executive of The Tax Justice Network, a lobby group which campaigned for the CRS for years before its introduction, urged HMRC to go further and publish estimates of the tax gap in jurisdictions individual offshore.

“This information has the potential to reveal the extent of undeclared assets of UK tax residents in every other jurisdiction and allow the government to demonstrate progress in closing the gap each year,” he said.

HMRC added: “We encourage all taxpayers who may not have declared the correct amount of offshore tax to review their affairs and, if necessary, contact us to put their affairs in order.”


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