Panama Papers: HMRC 'starved' by austerity could not pursue tax evaders even if it wanted to

Leading lawyers warn the tax authority was already fatally overstretched before the new revelations

Despite the tropical locations, this is a very British scandal (AFP/Getty Images)

The UK tax authority would be incapable of chasing up tax evaders named in the huge “Panama Papers” document leak because it has been “starved” of funding by Tory austerity cuts, leading lawyers have warned.

HMRC issued a bold statement in the aftermath of the scandal, saying it had requested investigative journalists at the ICIJ share the 2.6 TB of data involved. “We will closely examine the date and will act on it swiftly and appropriately,” it said.

Yet there are concerns that the tax authority, with staffing levels half what they were at its peak under the last Labour government, was already too overstretched to prosecute tax dodgers prior to the new revelations.

Jonathan Riley, head of tax at Grant Thornton, said his firm believed HMRC could be “overwhelmed” by the “Panama Papers” and would be better off outsourcing the investigation.

Speaking to The Independent, tax avoidance expert Jolyon Maugham QC warned the taxman had been “starved of money” by the Treasury.

“Even prior to the leak, HMRC was unable to cope,” he said. “I don’t think they have the manpower, I don’t think they have the money and I’m not sure they have the will [to bring prosecutions].”

Lawyers for the HMRC had themselves “blamed austerity for not being able to do their job” in previous tax evasion cases that then fell apart, Mr Maugham said.

“It tends to overestimate the short term gains of doing civil deals with criminal non-tax payers, compared to the long term gains of sending a clear signal to would-be criminals,” he said.

“It’s the Treasury’s fault, because of its curious policy for starving its only revenue raising department of the resource it needs to raise tax.

“It is the consequence of an ill-thought-through manifesto to prioritise the closing of the deficit at the expense of all.”

The “Panama Papers” saw 11.5 million documents leaked to journalists which revealed how the rich and powerful shielded their tax arrangements over a period spanning four decades.

Those named have included current and former world leaders. There is no suggestion that those named as using the Panamanian law firm Mossack Fonseca were doing anything illegal. The firm itself has denied any wrongdoing.

The Independent has reached out to HMRC for comment on the lawyers’ concerns.