George Osborne's tax avoidance crackdown misses target by hundreds of millions of pounds

The Office for Budget Responsibility says some areas of scheme are underperforming compared to expectations

Jon Stone
Wednesday 30 December 2015 13:27 GMT
George Osborne, the Chancellor
George Osborne, the Chancellor (Getty Images)

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Louise Thomas

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George Osborne’s plan to crack down on tax avoidance has fallen £600m short of its hearalded benefits, according to an analysis by a Government watchdog.

The Office for Budget Responsibility (OBR) said in an analysis of progress so far that some aspects of the programme had unperformed compared to the Chancellor’s initial promises.

“Most measures are within £50 million of the original estimate either way, but there have been five measures where the average yield is lower by more than £50 million a year,” the OBR said.

“No measures have significantly outperformed the original costing.”

Some problems with parts of the crackdown are “expected to continue in future years”, the OBR said.

Tax repatriation from the tax havens of the Isle of Man, Jersey, and Gurnsey, as well as changes to tax credit calculations had fallen short of expectations. Some HMRC compliance measures were also not bringing in expected revenue.

The OBR also noted that no referrals had yet been made to the Government’s heralded “general anti-abuse rule” – which campaigners had welcomed as a positive step forward.

Labour’s shadow cabinet minister Jonathan Ashworth told the Daily Mail newspaper that the Chancellor had “failed on his own terms” to tackle tax avoidance.

The Government however says that the tax gap is falling over the long-term. The tax gap as defined by HMRC rose this year, however.

In November Edward Troup, the HMRC’s tax assurance commissioner, said the UK’s £34bn tax gap was no worse than in other nations.

“I think on many if not most accounts the UK is doing as well if not better than most other tax administrations,” he told the House of Commons Public Accounts Committee.

Earlier this year an investigation by the Independent found that the Government was still paying millions of pounds in aid to countries classified as tax havens by the European Union.

The OBR’s analysis was included in the November Autumn Statement documents released by the watchdog, which was set up by Mr Osborne himself in 2011.

A Treasury spokesperson said the Government was steadily reducing the tax gap and that extra funding announced as recently as the Autumn Statement would turn the tide.

“The Government has cracked down on tax avoidance and evasion with a wide range of civil and criminal interventions to collect and protect revenue for public services, steadily reducing the tax gap to its lowest-ever recorded level. Last year, HMRC collected and protected a record £26 billion in revenues from compliance activities,” he said.

“Additional funding and new measures contained in the Summer Budget and Autumn Statement are allowing HMRC to crack down further on the hidden economy, get tougher on offshore evasion, and increase the number of prosecutions of wealthy tax evaders.

“The small minority who persist in dragging their feet, hiding or helping others to hide their money and assets at home or abroad, now face increased financial penalties and risk criminal prosecution.”

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