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A question for Margaret, Lady Hodge

The exchequer loses at least £5bn a year because the taxman is failing to crack down on \”morally wrong\” tax avoidance schemes similar to the one used by comedian Jimmy Carr, the chair of the Commons public accounts committee warns today.

Margaret Hodge, the former Labour minister, said rich businessmen designing the schemes were \”running rings\” around HMRC.

She said HMRC had an \”appallingly bad record\” at catching tax cheats, having fined just 11 people for promoting tax avoidance since 2004 – despite 10,000 people a year coming forward to report tax avoidance schemes.

A report by the PAC published on Tuesday says there is \”a lot of money to be made in selling avoidance schemes\”, and commissions paid to the creators of the schemes can be up to 20% of the tax saved.

Hodge told Lin Homer, chief executive and permanent secretary of HMRC, that she didn\’t want to be \”aggressive and awful about it\”, but the agency\’s failure to crack down on tax avoidance was \”gobsmacking\”.

\”There has been huge growth, and appalling proliferation [in tax avoidance], and what has HMRC been up to? It has only taken 11 cases to tax tribunals,\” she said.

The 11 tax avoidance promoters taken to tribunal were fined just £5,000 each despite the maximum penalty being £1m. Hodge said HMRC had never fined an individual for failing to disclose a scheme on their tax return.

Hodge said HMRC must \”robustly\” crack down on tax avoidance promoters that are \”costing the country billions, as the public are struggling with less money in their pockets\”. She added: \”It offends the sense of fairness.\”

She called on tax avoiders and the businesses creating tax avoidance schemes to be \”named and shamed\”.

The trust which protects your stake in the family company, Stemcor, so that your children and grandchildren will benefit from a reduction in inheritance tax. On that £17 million or so stake.

Have the promoters of that scheme been named and shamed? Should they be so? If not why not? Should the beneficiaries of that trust be named and shamed? If not, why not?

Or are we in that very interesting alternative world? The one where if not a Labour MP obeys the tax law it is immoral but if a Labour MP obeys the tax law it is moral?

14 thoughts on “A question for Margaret, Lady Hodge”

  1. No, you’re completely wrong here.

    Hodge is objecting to HMRC’s limited work in clamping down on avoidance schemes which are illegal (hence why the cases she cites involved people being fined, rather than people being whined at by Richard Murphy).

    That view is completely consistent with seeking to legally minimise your own tax payments. “I think people who break the law should be punished and people who don’t shouldn’t be” is not a particularly controversial view.

  2. “morally wrong” tax avoidance

    tax avoidance promoters

    She called on tax avoiders and the businesses creating tax avoidance schemes to be “named and shamed”.

    Just think of the houses we could build and the pot holes we could fill with [these lost taxes] without adding to our [national] deficit,” she said. “It’s megabucks.”

    This is a government department that cannot keep up with govt legislation. Response? Rhetorical games, the deliberate blurring of evasion and avoidance, and attempts to bypass the whole innocent-until-proven guilty concept.


  3. Good grief! Eleven evil tax evaders prosecuted after 10,00 reported.
    Remind me now. What was the proportion of our Honourable MP’s prosecuted for fiddling expenses? And what was the defense cited by those who wriggled off? Something about their expense claims, however apparently unjustified, being in accordance with the rules?
    Fuck off Hodge.

  4. JohnB,

    No, she’s being inconsistent. She’s whining about “morally wrong” and illustrating that with examples of illegality. That she is benefiting from a scheme that, if they bothered to think about it (why? the LHTD can do all your thinking for you) they would consider “immoral” (of course, most of them think inherited wealth is immoral but that’s another story) is hypocrisy. Situation normal for a member of the political class, of course.

    What she is doing is, of course, legal. But then so are many tax avoidance schemes. Hence, possibly, why such a small proportion are taken to court.

  5. John B

    Actually you have the wrong end of the stick.

    Firstly, Hodge the Dodge is clearly talking about immoral rather than just illegal avoidance. Secondly, just because a scheme is reported,it doesn’t mean it is illegal. You are required to report all avoidance schemes. The fact that,on examination, only 11 have turned out to be illegal doesn’t mean that HMRC are failing to crackdown on illegal schemes unless you (or the Dodger) have evidence that these other schemes were illegal. It is all just bullshit innuendo.

  6. @ johnb
    “No, you’re completely wrong here.”

    Very clearly not as explained by various comments following. An avoidance scheme that is illegal is simply evasion.

    Or if the concepts or avoidance and evasion are simply too complicated, perhaps just stick to legal and illegal.

    And if Hodge is suggesting that those who obey the law should be named and shamed, then at the very least let’s just politely say she’s on somewhat dodgy ground.

  7. “11 tax avoiders taken to tribunal”

    Really? In my day job, I have attended perhaps 30 tribunals just in the telecom industry since 2008. Russell Square alone has 3-4 rooms dedicated to processing “tax avoiders” in various industries brought to book by HMRC.

    She is talking rubbish.

  8. @ Gary

    I presume (from your quotes) that you meant tax “evaders” brought to book by HMRC..?!

    Ignoring her often inept (or is it deliberate) misuse of terminology, Hodge above appears to be talking about promoters.

  9. No, the comments above are wrong. Unsurprisingly.

    There is a formal definition in law of a “tax avoidance scheme”. These must be disclosed by promoters to HMRC. This is a completely different concept from tax evasion.

    It would be a good idea to read the comments from Jason Collins at Pinsent Mason in this article before commenting further.

  10. Dunno what happened there. Let’s try again …

    There is a formal definition in law of a “tax avoidance scheme”. These must be disclosed by promoters to HMRC. This is a completely different concept from tax evasion.

    Which only goes to show that JohnB has neither read Hodge’s comments or the comments above (with the possible exception of #9).

    Hodge is, as repeatedly pointed out, deliberately confusing illegality (whether this is tax evasion or failure to report a tax avoidance scheme) with the wide “tax morality” (as per the LHTD description du jour) ‘debate’.

  11. Now that chez Timmy is available again, I can post this. Lucky I saved it. Well, possibly not …

    BTW, from the Pinsent’s article JohnB links to:

    The committee noted that “public anger and consumer pressure” had impacted on multinational companies, such as Starbucks, that had been accused of unethical tax practices.

    So we have a new strawman. Not just “fair / avoidance / evasion” rather than “legal / illegal” but we now have to wrench the definitions open and insert “unethical’ – I presume between ‘fair’ and ‘avoidance’. It appears to mean “something utterly and totally legal, as confirmed by HMRC, but that ignorant lefties feel that they can rant about without being shut in the dungeon for committing the ancient offence of ‘ridicule in a public forum’.”

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