My Lords, the Government act as soon as they become aware of schemes to avoid tax and challenge those by every means available. In the past year, seven schemes have been closed down with immediate effect, and since 2010 the Government have litigated some 30 avoidance cases. The Government are now consulting on a general anti-abuse rule and extending the successful Disclosure of Tax Avoidance Schemes regime to ensure that even more schemes are disclosed.
I thank the Minister for that reply. Is it not the case that thousands of extremely rich people are engaged in tax avoidance schemes and that the country is suffering a heavy loss as a result—some £25 billion? Is there not a case for setting up an all-party committee to look into this atrocious situation, which continues? What the Minister said deals with only part of the problem, not the whole problem.
My Lords, I certainly agree with the noble Lord, Lord Clinton-Davis, about the seriousness of the problem. That is why the Government—and HMRC in particular—are tackling it with all the available weapons. I stress that the Disclosure of Tax Avoidance Schemes regime, which was introduced by the previous Government in 2004, has been a successful part of that. Of the total tax gap, that is estimated to be around £35 billion, £5 billion is estimated to be as a result of avoidance. It is important to be clear on the figures.
In relation to schemes of wealthy individuals, the K2 and Icebreaker schemes, which have had much recent publicity, are under investigation by HMRC. HMRC and, of course, the Government want to make sure that everyone, wealthy or not, pays a fair amount of tax. HMRC has rolled out some very specific initiatives within its High Net Worth Unit in order tackle even more vigorously the particular challenges around individuals of high net worth.
Does my noble friend agree that the best way to avoid people coming up with complex tax avoidance schemes is to have simpler, lower taxes—which will maximise revenue and obviate the need for people to use their energies in this way—and concentrate on creating wealth and growth in our economy?
Will my noble friend bear in mind that, as tax avoidance and evasion from the UK is at least 15 times greater than social security abuse and fraud, that the Government should therefore be 15 times more energetic in dealing with tax avoidance and evasion than they are with social security?
My Lords, I do think that we are comparing apples and pears. We will be vigorous on both fronts. In relation to tax avoidance, HMRC has reassigned some £900 million of its expenditure within the spending round to tackle this issue. We should also remember that while the tax gap in the UK is £35 billion—about 8% of liabilities—it compares well on an international comparison. For example, the equivalent in the US is 14% and in Sweden 10%. So, yes, there are big numbers to be played for, but good progress is being made.
The House may have been encouraged by the Minister’s initial constructive response but past practice does not seem to quite measure up to his optimism. He commended the legislation passed by the Labour Government in 2004 under which accountants have to submit to Her Majesty’s Revenue and Customs any scheme which leads to tax avoidance. Was this implemented in the famous case of the comedian Jimmy Carr? Did his accountant inform HMRC? If so, what was done about it? If he did not, when are the Government going to act?
My Lords, individual taxpayer confidentiality is very important. It is the prime reason why we are certainly not going to see individual tax returns published and, therefore, I am not going to comment on an individual case. That particular case has had a great deal of airing in the past couple of weeks.
Is the Minister aware of the job that charities do for their donors by picking out case histories of how their donations can make a difference to particular families and children? Might not Her Majesty’s Customs and Revenue do more to inform taxpayers about the value for money that they get in paying for services? It could give a specific example of, say, a bright graduate, recruited into the teaching profession, making a difference to particular children in an inner city area? The graduate could then say, “I am so grateful for the money that trained me and for the difference that I have been able to make to these children”. There are many concrete examples of the difference that taxpayers’ money makes to individuals, children and families.
I agree with the noble Earl that the voluntary and charitable sectors make an enormous contribution. Often they deliver more cost-effective and better quality services than public bodies and the tax regime around charities supports that. That is precisely why we are so keen to drive forward philanthropy and a tax system to support it. I share the noble Earl’s sentiments.