Accountancy body calls for investment to beat tax avoidance

HMRC needs investment to fight tax avoidance and evasion, the ACCA has said.

Investment in HM Revenue and Customs (HMRC) is needed in order to crack down on tax avoidance, according to the Association of Chartered Certified Accountants (ACCA).

Speaking as the Liberal Democrats' autumn conference takes place in Glasgow, the ACCA's head of taxation Chas Roy-Chowdhury noted that politicians from all parties are currently facing the stark choice between slashing public spending or raising taxes.

He noted that the Lib Dems appear to have recognised the necessity of increasing taxes in order to provide cuts to people on lower incomes and finance spending, but argued the party is "fudging the magnitude" of the billions of pounds of raises required to meet its pledges.

Fulfilling these promises would mean either raising national insurance contributions (NICs), increasing VAT to 22.5 per cent, or reducing the inheritance tax threshold - none of which would prove popular with voters, Mr Roy-Chowdhury pointed out.

Furthermore, the ACCA believes changing VAT or NICs would fail to generate the necessary money for the public purse, leaving a VAT hike paid for by everyone as the "least worst option".

However, the accountancy body noted there is another solution - closing the so-called tax gap that sees an estimated £30 billion a year lost by the Treasury as a result of tax avoidance and illegal tax evasion.

This issue can be tackled by HMRC, Mr Roy-Chowdhury said, but only if it has the budget to do so.

"HMRC urgently needs investment to enable it to pursue tax avoidance and evasion more effectively and deal with the intricacies of tax legislation," he explained.

"It is an issue which politicians should address in any case as a way of raising more revenue under existing tax rates before they begin to think about raising taxes."