Labour accuses Chancellor of failing to 'get a grip' on tax avoidance by letting major firms keep £700m

Analysis of last week's Budget fine print finds ‘Google Tax’ will net millions less for the Treasury than initially forecast

Mr Hammond is under fire for his handling of tax avoidance in the wake of the Panama Papers scandal (AP)

Philip Hammond has been urged to “get a grip” on tax avoidance as measures to tackle the practice among rich and powerful firms were set to bring in £700m less than expected over the next five years.

Analysis of the Budget fine print found the so-called “Google Tax” – which aims to deter multinational firms from legally shifting profits into tax havens – will raise significantly less for the Treasury’s coffers than planned when it was unveiled by George Osborne in 2015.

Updated forecasts show £200m will go uncollected next year, with a total bill of £700m by 2020 to 2021, which comes amid a growing clamour for extra funding for the NHS, social care and housing.

The Treasury said the figures showed that the tax was working as planned, as businesses were changing their behaviour to move away from storing money in tax havens.

It comes after millions of leaked “Paradise Papers” documents shone a light on the extent of secretive overseas investments in offshore tax havens by high-profile figures ranging from Bono to the Queen.

Shadow Treasury minister Jonathan Reynolds questioned why public services were struggling when multinational companies dodged their tax obligations, casting doubt on the Chancellor’s plans for a new crackdown on tax dodging among tech giants from 2019.

He said: “The Chancellor needs to get a grip of tax avoidance. It’s not fair that large multinationals are not paying their fair share yet benefiting from the billions in corporation tax giveaways Philip Hammond is continuing.

“The Chancellor said he was announcing a new list of tax avoidance measures, how can we trust him he can’t collect the money from the current ones?

“At a time when the Tories claim we don’t have enough money for our vital public services like our NHS, police and schools; there is no excuse for failing to clamp dodging on tax dodging firms.”

Labour also attacked Mr Hammond for cutting a levy on banks which meant some of the UKs largest banks would receive a £4.7bn tax giveaway by 2020.

A Treasury spokeswoman said: “The Diverted Profits Tax is an important tool in countering artificial profit shifting, and since its introduction in 2015 has raised significant revenue and successfully encouraged groups to change their behaviour and restructure their tax regimes to pay more corporation tax in the UK.”

The explosive Paradise Papers leak shocked the world by detailing the extent of global tax avoidance, featuring figures such as former Tory treasurer Lord Ashcroft and US president Donald Trump’s commerce secretary, Wilbur Ross, who is reportedly linked to a Russian firm.

The Queen’s private estate, the Duchy of Lancaster, was also found to have millions of pounds invested in offshore arrangements.