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The UK’s crackdown on offshore tax avoidance has only recovered about a third of the £1 billion figure that the government had predicted it would raise.

HMRC suggests that a series of measures used to tackle tax evasion will only bring in £349 million a year, almost £650 million less than the £997 million target.

Failed attempts to close tax loopholes have meant that assurances from MPs made after the Paradise Papers release have been undermined.

John McDonnell, shadow chancellor said that these new figures showed “the utter failure” of the government to ensure that everyone is paying the tax that they owe. He said that while the government had been quick to promise action, they have been slow to deliver on it. “Now they have been shown to not even deliver on what they originally promise.”

New measures

As part of the new measures rolled out to combat tax avoidance, the UK has made agreements with Switzerland, Liechtenstein and other low tax locations to recover unpaid tax for HMRC.

A total of 28 anti-avoidance measures introduced under the coalition and the Conservative government have been bringing in less than expected. Labour says that the gap between the tax intake originally forecasted and the revised estimates totalled £2.1 billion or 25%.

Other measures include attempts to tackle base-erosion and profit shifting, where businesses artificially move profits to locations with lower tax rates.

There are also new taxes on diverted profits and royalties which were expected to bring in a total of £515 million a year. However, it’s now expected that this figure will be £175 million less each year.

Labour is calling for the government to adopt policies it laid out in its election manifesto last year such as open registers of company owners in UK overseas territories and a public inquiry into tax avoidance.

On the upside

Some of the measures have had more of a positive effect than original forecasts predicted. There has been a crackdown on the way that company takeovers are structured and the estimated revenue raised through this has increased up to 554% from original estimates.

Companies are now prevented from avoiding stamp duty by cancelling and reissuing shares during a takeover. This new measure is forecast to raise £425 million a year, up from the original forecast of £65 million.

Back in November, Theresa May responded to the Paradise Papers revelation by pointing out that HMRC had brought in an extra £160 billion in tax revenue since 2010.

A spokesperson for the Treasury also said: “The UK has one of the lowest tax gaps in the world and we continue to take action to ensure everyone pays the tax they owe. Since 2010, we have secured and protected over £175bn for our public services that would have otherwise gone unpaid.”

Do you think the government should be doing more to combat tax avoidance? Let us know your thoughts in the comments.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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