Thousands of tax cheats – including those with no previous criminal convictions – face being prosecuted and jailed as part of a crack-down on evasion to be launched by the Crown Prosecution Service (CPS).
Keir Starmer, the director of Public Prosecutions, will today promise to "ramp up" the number of cases it pursues by five-fold over the next two years.
Smaller-scale tax cheats – including middle-class homeowners who don't declare their rental incomes and white-collar professionals who invest in evasion schemes – will be targeted as the CPS is determined to maximise the deterrent effect of prosecutions.
In 2010 there were just 200 convictions for tax evasion despite an estimated cost of such fraud of £14bn a year. In a speech Mr Starmer is expected to say that such a lax enforcement is not acceptable in a time of economic hardship.
"Tax evasion has to be dealt with robustly all the time. But in a recession, when ordinary law-abiding taxpayers are suffering real hardship, the need to deter, detect and prosecute those who evade tax is greater than ever," he will say.
Mr Starmer will add that it is a "long-standing myth" that tax evasion is a victimless crime. "Many would be outraged if money was stolen from their personal bank accounts. So let us work out the cost to every family and every adult in the UK of tax evasion.
"The latest estimate by HMRC suggests that tax evasion costs the UK economy £14bn a year. That is the equivalent of £530 from every household, or £ 769 per family. A victimless crime? This is money that could have been spent on schools, hospitals, firefighters, police and public services."
Much of the burden of prosecutions is likely to fall on HMRC, which has been given an additional £1bn to tackle tax evasion, fraud and avoidance.
But Mr Starmer will say that many cases of illegality will now be forcefully pursued and that senior judges had made it clear that when it comes to large-scale tax evasion, even those without previous convictions can expect significant custodial sentences.
A spokesman for HMRC said: "The vast majority of taxpayers are honest and pay what they have to under the law. They rightly expect us to tackle the small minority of cheats who deprive the country of vital revenues and we are using every penny of our additional resources tackle the cheats."
Meanwhile, HMRC has also stepped up investigations into the way international firms can avoid paying tax by moving profits between different countries. HMRC's Large Business Service, which investigates 770 of the biggest companies, is now investigating £1bn of tax linked to transfer-pricing issues, up 47 per cent up from £680m in 2011.
MPs also plan to question representatives of the biggest accounting firms over their role in helping big companies minimise their tax bills.
A spokesman for the Commons Public Accounts Committee said it would hold a hearing on 31 January, at which senior tax specialists from PricewaterhouseCoopers, Ernst and Young, KPMG and Deloitte would testify. The specialists are likely to face hostile questioning which could be damaging for the firms.
Cheats: how they do it
Secretors are taxpayers with fairly sophisticated financial knowledge who hide some of their savings abroad to avoid paying tax on the income. Unlike a UK savings account, no tax is deducted from interest at source on foreign savings accounts, so the onus is on the UK taxpayer to declare this income source.
'Ghosts' are people who work but whose sources of income are unknown to the Revenue because they fail to declare them. This includes builders and other contractors who are paid on a cash-in-hand basis.
A significant proportion of 'ghosts' are also believed to be illegally claiming benefits.
Some people may declare a proportion of their income but hide other significant sources. For example, a homeowner who lets out a spare room to a lodger may not be declaring their rental income, but they could have a job and have PAYE deducted at source.Reuse content