Labour to hire tax 'hit squad'

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Labour would recruit some of the City's leading experts on tax avoidance to a "hit squad" designed to recoup the millions top firms are failing to pay.

Under the plan, a small unit of highly-paid tax specialists would help the government close the tax loop-holes which big firms and wealthy individuals are exploiting.

Because of the cost of employing some of the Square Mile's highest-paid employees, the shadow Chancellor, Gordon Brown, plans to restrict the new unit to 25 people.

But he is convinced that the new squad would more than pay for itself. According to government figures every pound spent on tax compliance of oil companies brings in on average pounds 189, with the international companies sector yielding pounds 169.

Tax avoidance which, unlike tax evasion, is perfectly legal is on the increase, say City analysts.

Mr Brown said: "We need to make sure that everyone pays their fair share of tax. The hard-working majority who pay their PAYE and VAT want assurance that others are not avoiding paying their fair share too.

"Our hit squad will aim to employ the very best to beat the very best avoiders."

Recent Treasury figures have shown a lower than expected tax yield which has put pressure on the Chancellor, Kenneth Clarke, in the run-up to a Budget expected to deliver tax cuts. The tax shortfall is ascribed by many experts, including Treasury officials, to the black economy and to increasingly sophisticatedstrategies for tax avoidance, particularly of VAT.

Because of the increase in the rate of VAT to 17.5 per cent, many more firms now find it worthwhile to employ specialists to reduce their bills.

In the year to March 1996 VAT receipts amounted to pounds 43.3bn, slightly below the Treasury's forecast made in November last year of pounds 44bn. However this is well down on the higher forecast of pounds 49bn (later amended for technical reasons to pounds 48bn) made in November 1994.

The Treasury and Customs and Excise have launched a research project to try to discover the cause of the fall in VAT revenues below projections.