MPs have demanded HMRC puts an end to the vast sums of public money being lost to offshore tax avoidance, which they say the agency has drastically underestimated.
In a letter sent on Wednesday, the cross-party Public Accounts Committee (PAC) said it has previously reported concerns about HMRC’s pursuit of offshore wealth. “Over the last week, with the publication of several troubling press reports, our concern about these issues has deepened,” it said.
It follows last week’s revelations by the Bureau of Investigative Journalism (TBIJ) that Roman Abramovich may owe £1bn in UK tax and fines from a sprawling offshore hedge fund operation.
The committee raised questions over the supposed size of the offshore tax gap – the difference between what is collected and what is due – which HMRC recently estimated to be £300m. “It now appears this is a gross underestimate,” said the letter.
It also asked for detailed answers to a number of questions about HMRC’s offshore tax collection, including its level of resourcing, enforcement policy and expected number of prosecutions.
The letter, sent to to HMRC chief Jim Harra and signed by PAC chair Geoffrey Clifton-Brown, asked for a response by 21 February. It raised the prospect of a public evidence session if the answers are unsatisfactory.
Abramovich may owe UK £1bn in unpaid tax
Last Thursday, Labour MP Joe Powell also wrote to HMRC in his capacity as chair of the all-party parliamentary group for anti-corruption and responsible tax, and the former Conservative leader Iain Duncan Smith submitted a written question to Parliament. Both called for an investigation to be opened into Abramovich’s tax bill.
They both referred to last week’s revelations by TBIJ, the BBC and the Guardian that Abramovich may have avoided huge amounts of tax by skirting “corporate residency” rules relating to a network of companies registered in the British Virgin Islands (BVI).
Lloyd Hatton, Labour MP for South Dorset and member of the accounts committee, told TBIJ: “The fact that a single individual’s unpaid tax bill appears to surpass HMRC’s entire offshore tax gap estimate makes a mockery of their attempt to clamp down on tax avoidance.
“Abramovich is just one of a great many tax dodgers. The only way to ensure that everyone pays their fair share is to throw open the books and end decades of secrecy in these tax havens. The worst offenders, like the British Virgin Islands, cannot be let off the hook.”
In Parliament on Wednesday, Joe Powell tabled a debate on the overseas territories and expressed his concern that “the most notorious and brazen enablers of illicit finance and money laundering are operating as part of the UK family”.
Phil Brickell, Labour MP for Bolton West, said: “It’s simply unacceptable – indeed morally indefensible – that we find ourselves in a situation where a number of British Overseas Territories continue to incorporate entities hiding behind the corporate veil of secrecy, all the while our constituents pay their taxes in good order.”
Conservative MP Andrew Mitchell pointed the finger at “the brilliant officials in the foreign office” who he said have “been too willing to keep the peace between the overseas territories and London”.
He added: “If [overseas territories] want to travel under our flag, if they want to have the privilege under our monarch, then they must accept our values as well.”
Responding on behalf of the government, Treasury minister James Murray said: “The overseas territories are working to implement international transparency standards.”
The BVI government has previously pledged to bring in measures improving financial transparency. But its latest proposals around the access to information on corporate ownership, published last month, have prompted strong criticism.
In another letter, sent on Tuesday, a group of MPs wrote to the BVI’s premier about the territory’s “continued role in facilitating illicit finance and kleptocracy”.
It warned that the new proposals “would virtually block all access to beneficial ownership data for journalists, civil society organisations and businesses”.
The BVI’s proposals would also introduce a system whereby a company’s owner is notified when a request for ownership information is made. “This mechanism would expose journalists to legal or physical intimidation when investigating high-risk stories on drug cartels, kleptocrats or human traffickers,” the MPs warned.
Representatives for Abramovich told TBIJ he obtained independent professional tax and legal advice and acted in accordance with it. He denied knowledge of any unlawful tax avoidance or evasion scheme and said he was not liable for any scheme.
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Press Release from Carey Olsen, Friday 19 April, 2024. Carey Olsen has advised investment services firm Sanctum FI LLP (“Sanctum”), the investment manager of Financial Science Holdings