MPs Call For Review Of Projected Revenues From Tax Avoidance Crackdown

In December, Chancellor George Osborne unveiled a set of measures seen as the biggest effort so far to crack down on tax avoiders. Osborne also forecast quite impressive yields for HMRC but his projections have been called into question by the Treasury Select Committee, which believes that the figures should be reviewed given the extremely uncertain nature of such forecasts.

The measures announced by Osborne target £2.1 billion from false self-employment, with a net £520 million projected for 2014/15 alone. Overall, the Chancellor expects the anti-avoidance package to generate additional revenues of £6.8 billion. The figure rises to £9 billion when proposals against fraud, error and evasion are included.

“inherently extremely uncertain”

However, committee chairman Andrew Tyrie noted that experience had shown it was extremely difficult to calculate how much a specific measure would raise, Contractor UK reported. The results often fail to meet expectations, as was amply demonstrated with the tax deal struck by the UK and Switzerland. This agreement was originally forecast to generate £5.3 billion over five years but projections have since been downgraded to just £1.9 billion. The point is that such forecasts are “inherently extremely uncertain” and the government should review the way in which it accounts for projected revenues from tax avoidance measures, Tyrie said.

The Treasury Select Committee suggests that the review be carried out by the Office for Budget Responsibility (OBR), which has already admitted that proceeds from anti-avoidance measures are generally subject to greater uncertainty compared to yields from other policy measures. The OBR has also conceded that previous policies are of limited help when it comes to learning lessons from the past and applying that knowledge to revenue projections.