UHY Hacker Young said the extra investigations and more aggressive stance by the HM Revenue and Customs risks making the UK a less attractive jurisdiction for businesses.
“The Government and HMRC now seem to believe that they found the secret of alchemy,” said Roy Maugham, tax partner at the firm.
“All they need to do is invest more money in tax investigations and compliance work and the extra tax income will keep flooding in.
“The reality is that much of the money that HMRC collects from compliance work is from businesses that feel intimidated into settling or where HMRC is able to outspend a less well-resourced small or medium sized company.”
Mr Maugham said many UK companies have moved their domicile overseas to Ireland, Switzerland and Malta not just because of the UK’s high business taxes but because of the increasingly aggressive attitude of HMRC to tax collection.
“There is a downside to their tough approach,” he said.
The lost tax revenues from businesses that have avoided setting up their headquarters in the UK could be far more costly to HM Treasury than the short-term boost from the increased compliance take, he said.
Short term elasticity and long term elasticity can be quite different you know. But of course we mustn\’t tell Ritchie that as that is neo-classical economics, the stuf he insists isn\’t true.