British budget forecasts blurred by tax clampdown benefits

(Reuters) – Britain’s budget forecasts are in danger of becoming too reliant on hard-to-predict windfalls from the fight against tax avoidance, lawmakers said on Saturday.

The government has projected that by tightening its rules to reduce legal tax avoidance the state could net 6.8 billion pounds ($11.37 billion) in new revenue over the next six years.

That has made it a significant part of plans to cut the country’s budget deficit.

However, such estimates have proved too optimistic in the past and the subsequent shortfalls have left holes in public finances. A tax deal with Switzerland starting in January 2013 was expected to bring in a total of 5.3 billion pounds over six years, but that figure has been cut by almost two-thirds.

“Every year estimates have to be made of the yield of anti-avoidance measures, in the face of great uncertainty about the outcomes,” a report by parliament’s influential Treasury Committee said.

“This perennial problem has now assumed particular fiscal importance given the size of the revenue being forecast.”

The report also urged the government’s budget watchdog to increase efforts to track whether anti-avoidance measures met their revenue targets. It said that if this could not be done, the use of such targets should be restricted.

Credit: Reuters