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Name and shame tax dodgers, say MPs

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Her Majesty's Revenue & Customs (HMRC) should "name and shame" those who create, sell or use tax avoidance schemes to discourage activity which is costing the Treasury billions of pounds a year, a committee of MPs has said.

Margaret Hodge, chair of the public accounts committee, has promised that the government will crack down on tax avoidance schemes after it emerged that £5bn was lost to tax avoidance in the financial year ending 2011.

“It is a game of cat and mouse and HMRC is losing,” she said.

Hodge said the promoters of such schemes – which abuse legal loopholes to avoid paying tax – and those who use them are “running rings” around HMRC.

“The complexity of tax law creates opportunities for avoidance, there are no penalties to stop people promoting these schemes, and HMRC is ineffective in challenging promoters who are deliberately obstructive or deliberately sell schemes they know do not work,” she said. “Promoters pocket their fees whether their schemes work or not.

“HMRC should publicly name and shame those who sell or use tax avoidance schemes in order to discourage such activity.”

Hodge cited a Jersey-based scheme dubbed K2 which had been used by the television comedian Jimmy Carr to shelter income from tax. Carr later apologised.

Richard Murphy, director of Tax Research UK, said: “Naming and shaming can work but is also a critical form of consumer protection. Customers that end up using tax avoidance schemes are often unaware of the levels of tax abuse to which they are being left accountable.

“We need to have stronger anti-abuse legislation in place. And accountants and lawyers that are flaunting the rules need to be aware of the potential consequences.”

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