Posted 6:06 AM by Dil
MPs want tougher checks on tax fraud
By Andrew Sparrow, Political Correspondent
(Filed: 13/01/2004)


The Inland Revenue should investigate tax evasion more rigorously because fraudsters probably believe "the chance of being caught is remote", MPs say today.



In a critical report, the Public Accounts Committee suggests that the taxpayer could be losing billions of pounds a year because tax fraud is not being investigated thoroughly enough.

The Inland Revenue spent £428 million investigating non-compliance in 2001-02. It investigates between 400 and 450 serious fraud cases a year. But the Department for Work and Pensions prosecutes 12,000 people for benefit fraud annually, achieving a 98 per cent conviction rate.

Urging the Inland Revenue to tackle the problem more aggressively, the MPs point out that the Revenue has failed to produce an official estimate of the "tax gap" - the amount of money lost through fraud.

One study showed that about five per cent of income tax self assessment revenue was being lost through non-compliance, costing the taxpayer £2.5 billion a year.

Self assessment accounts for roughly a quarter of the money collected by the Revenue. In 2001-02 its total receipts were £214 billion, suggesting that the overall amount lost through fraud could be much higher than £2.5 billion.

"To those contemplating fraud the chances of getting caught could appear minimal, since the Revenue carry out only 400 serious fraud investigations and 60 prosecutions a year on a customer base of more than 30 million," the MPs say.

In 2003-04 the Revenue will be responsible for distributing £15 billion to low-income claimants in the form of tax credits and the MPs suggest that it should be doing more to investigate fraud in this area.

Edward Leigh, chairman of the committee, said: "With only 400 serious fraud investigations a year against 30 million customers, those contemplating tax fraud may well calculate that the chance of being caught is remote. I urge the Revenue to step up its fraud investigation work."

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