Fears that cuts are taking toll on taxman


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The Independent Online

The number of requests for information on individuals' tax affairs issued by the taxman has declined by 40 per cent, raising questions over whether HMRC is sufficiently resourced to clamp down on evasion and aggressive avoidance.

Her Majesty's Revenue and Customs made 640 requests for information under its "double taxation" agreements with other nations in the financial year ending last March. This was down from the 857 it issued in the 2010-11 financial year.

According to the law firm Pinsent Masons, which collected the figures, the decline in requests might signal that more avoiders are owning up.

A partner at the firm, Phil Berwick, said: "Many potential targets might be coming forward voluntarily, saving the HMRC from launching an investigation. HMRC's recent tough approach has prompted people on to the straight and narrow".

However, Mr Berwick added that the decline might reflect a shortage of resources at HMRC, which is due to see staffing levels fall by 44 per cent on 2005 levels by 2015. "It may be the case that HMRC's heavy workload is catching up with it," he said. "The recent National Audit Office report on HMRC's compliance performance revealed that HMRC had 41,000 open avoidance investigations. HMRC has pushed very hard on compliance recently and may be hitting capacity".

Double taxation agreements are designed to prevent an individual's incomes being taxed in two different countries, but they also enable tax authorities to discover the value of assets held by individuals overseas. HMRC has one of the world's largest networks of double taxation agreements.

George Osborne pledged £77m more in resources to HMRC in last month's Autumn Statement, but staffing levels at the department are still set to reach an all-time low of 56,100 by 2015, down from 97,073 in 2005.