“A crackdown on offshore tax cheats has only recovered about a third of the £1bn that the government had predicted, according to estimates.
Figures from HM Revenue & Customs suggest that a series of measures to tackle offshore tax evasion will only bring in £349m a year – £650m a year less than had been hoped for.
Other measures aimed at closing tax avoidance loopholes have also failed to generate the revenues that had been expected, undermining assurances from ministers that were made following the Paradise Papers exposé.
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The figure appears in a list of updated estimates provided by HMRC to the independent Office for Budget Responsibility over the last two years and released under a freedom of information request by the Labour party.
The shadow chancellor, John McDonnell, said these figures exposed “the utter failure” of the government to ensure the super-rich and big corporations were paying their fair share in tax.
“This could be just the tip of the iceberg,” he said. McDonnell said that after the Paradise Papers revelations last year, the government had been quick to promise action but slow to deliver on it. “Now they have been shown to not even deliver on what they originally promise,” he said.
Measures have been launched to tackle the use of offshore accounts to hide money from HMRC, including agreements with Switzerland, Liechtenstein and other low-tax regimes to recover unpaid tax.
In total, these measures were forecast to bring in an extra £997m a year to the Treasury. However, a new forecast in September 2017, after most of the measures had closed, downgraded that figure to £349m a year.
Labour says a total of 28 anti-avoidance measures introduced under the coalition and Conservative government were bringing in less than expected, and that the gap between the tax take originally expected from them and the revised forecasts totalled £2.1bn, or 25%.
Measures that are now expected to raise less than originally forecast include a package of moves to tackle base-erosion and profit-shifting, where companies artificially move profits to locations with low tax rates.
These, which included new taxes on diverted profits and royalties, were expected to bring in a total of £515m a year but are now expected to raise £175m less each year.
Accelerated payments, whereby investors in avoidance schemes are asked to pay any disputed tax upfront, were forecast to bring in £1.1bn annually, £154m more than the latest forecasts suggest has been raised.
Some measures have yielded more than the original forecasts predicted, and offset some of the £2.1bn difference. For instance, the sums raised through cracking down on the way company takeovers are structured have been revised up to 554% of the original forecast. Preventing companies from avoiding stamp duty by cancelling and reissuing shares during a takeover is forecast to make the Treasury £425m a year against an original figure of £65m.
McDonnell said the downwards revision of other forecasts showed the Conservatives were dragging their feet on tax avoidance. …”