Hodge calls for tougher tax regime

Public Accounts Committee chair Margaret Hodge has called for a tougher tax regime that closes loopholes exploited by companies and prosecutes avoidance schemes.

Speaking at a debate on tax reform at national and international level yesterday, Margaret Hodge said it was ‘unfair’ and ‘offensive’ that companies and individuals could take advantage of the complexities of UK tax rules.

‘Here in the UK, the tax gap – the difference between the amount the government considers is owed in tax and the amount it actually collects – has grown to £34bn,’ she told delegates at the debate organised by the parliamentary committee.

‘The future of our public services depends on getting in every pound of money rightfully owed to government. I am therefore in no doubt that the present settlement is wrong and must be reformed.’

Hodge said that she was ‘bewildered and ‘shocked’ at the sheer lengths that some companies would go to get out of paying their fair share of tax on the profits they made in the jurisdictions in which they do business.

‘We need to simplify our tax systems, so that they are less vulnerable to abuse.’

CBI chair Will Morris told the event that the international tax system was broken and that the rules went back ‘to colonial times’ so needed to be changed.

Agreeing, Grace Perez-Navarro, deputy director of the Organisation for Economic Co-operation and Development, warned that governments across the globe needed to fix mismatches in national tax laws and gaps in the international tax rules to bring them into the 21st century.

‘Our efforts to increase transparency, combat offshore evasion and counter tax avoidance by multinational enterprises are having an impact on the ground and helping countries to make sure that all taxpayers pay their fair share,’ she added.

Richard Murphy from Tax Research UK noted that for transparency and disclosure to work, the correct data needed to be collected.

‘And that is the next critical stage of this process. We’ve had the talks that were making progress but now we need to see action.

‘That action is not just country-by-country reporting templates – it’s published country-by-country accounts on record so that we can see that we can see this process is delivering.’

Michael Izza, chief executive at the Institute of Chartered Accountants in England and Wales, said: ‘The current system is not working at its optimum. There isn’t a chartered accountant in this country who understands that tax system from A-Z nor is there anyone in the HMRC [who fully understands it].

‘We’ve got to be serious about simplification. I think the Office of Tax Simplification has made a start but they haven’t been properly resourced, have a limited number of personnel and have been restricted in working on a number of things.’