Earlier today, the PAC released its 29th report into tax avoidance and its chair, the MP Margaret Hodge, gave a speech calling for much tougher action by HM Revenue & Customs and the Government in relation to tax avoidance.
One of the suggestions made was that those who promote or use tax avoidance schemes which are ultimately deemed to be unfeasible by HMRC should be named publically.
However, tax experts suggest the approach could ultimately be counterproductive.
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said: “Tax avoidance is not illegal. Naming and shaming can penalise individuals and business reputations when they have not broken the law.
“There is also an issue over where you draw the line. There isn’t a clear cliff edge between what you could say is acceptable tax planning and what is unacceptable tax avoidance. There is difficulty in terms of when name and shame becomes appropriate. Is it something that is linked to the amount of tax that isn’t paid, or the way tax is avoided?”
Roy-Chowdhury added that there is a risk when a “name and shame” approach is adopted that it becomes disproportionate and that companies promoting “perfectly acceptable financial planning initiatives” are severely punished, despite operating within mainstream rules.
Jason Collins, head of tax at international law firm Pinsent Masons meanwhile, said the PAC report has “laid down the gauntlet to HMRC”.
“The perception that a small minority of promoters continue to strut around like peacocks appears to have really got under the skin of the PAC,” said Collins.
“The PAC is recommending that HMRC comes up with more strategies for hitting promoters where it really hurts – in the wallet.”
