Osborne sets £17billion target for tax evasion recovery

UK Chancellor George Osborne has reportedly increased the pressure on HM Revenue & Customs to catch companies and wealthy individuals evading tax. According to the UK press, he has written to HMRC chief executive Lin Homer, setting a target of raising £17bn this year from “catching out” tax cheats - £3.1 billion more than was achieved last year.

The Chancellor has suffered a number of public relations disasters recently – from the popular outrage over the reduction in the top rate of income tax, to the introduction of the so-called “pasty tax” and the “granny tax”, to revelations by the Treasury that almost one in ten people in the UK earning more than £10m per year is paying less than the 20% basic rate of income tax.  As a consequence, it would appear he feels under pressure to be seen to be clamping down on tax evaders and businesses who take advantage of loopholes to reduce their tax bills.

Stamping out tax evasion is not a controversial thing to do but setting financial targets for HMRC to achieve which encompass tax avoidance will be more controversial.  There is a fine line between arrangements which are legitimate and bona fide ways to minimise a tax bills, and those which over-step the line to become illegal avoidance or evasion.  Having financial performance targets for HMRC will be bound to increase their motivation to challenge schemes which may be within the letter, if not the spirit, of the law.