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The black economy is normally associated with dodgy builders or painters and decorators. But white collar professionals are increasingly fiddling taxes, according to an MPs' report today that discloses that 36 barristers have been forced to return £605,000 to tax authorities. Hundreds of thousands of pounds have been recovered from lawyers, surgeons, medical consultants, and landlords under private deals with the tax authorities.
But this has not become public because none of the white collar tax evaders have been prosecuted, says the report by the Commons public accounts committee.
Revenue and Customs has disclosed that 57 barristers have been caught evading tax. Thirty-six reached a private settlement with Revenue and Customs and agreed to return £605,000 between them in unpaid tax and fines. Some 21 are still being investigated. No medical consultants are being prosecuted. The report says: "The department has undertaken various special projects on, for example, people holding offshore accounts who do not pay tax on their income or interest, barristers, nail bars, and medical consultants who undertake non-NHS work on which they may not be paying tax. The department has also sought to trace the owners of luxury yachts and vehicles who may not be declaring tax."
The committee condemns the failure of the tax authorities to deal with the problem and the kid glove treatment given to the wealthiest tax evaders. Unlike benefit fraudsters, who often appear in court under the full glare of publicity, Revenue and Customs has used its discretion to avoid bringing prosecutions. Ian Davidson, Labour MP for Glasgow, West, said: "It just strikes me as being unfair that if one of my constituents was caught, say, stealing £5 from a post office, they would undoubtedly be prosecuted and there would be consequences of publicity, yet if a barrister steals several hundred by avoiding his tax, then there is no publicity and he is allowed to carry on regardless."
Dave Harnett, acting chairman of Revenue and Customs, said: "We cannot prosecute everybody. We do that selectively. We would look very carefully at whether any were ... advising on tax. We are more likely to prosecute when someone is doing that; we look at the amounts of money involved, whether it was a first offence and any aggravating features. If someone, for example, was charging their fees out under a false name we would take that very seriously indeed."
Edward Leigh MP, Conservative chairman of the committee, said: "HM Revenue and Customs is apparently making little ground in its efforts to diminish the cash-in-hand culture operating in the UK. HMRC has no solid estimate of the level of losses but it might be over £2bn a year. With a detection rate of only 1.5%, the chances of being caught are very slight. For those who are caught, the penalties imposed are usually relatively trifling: on average only 3% of the tax detected. And in very few cases, just two out of a thousand, is a prosecution launched."
The report says: "In comparison the Department for Work and Pensions secures 60 prosecutions per thousand benefit fraud cases.
"The department should double the number of prosecutions. It should also raise public awareness about the risk of detection and punishment by advertising the results of its work."
The other main areas where tax evasion is rising are buy-to-let landlords and people trading on the internet. But the department has a huge backlog of cases which are not being investigated following the launch of a tax evasion helpline. There are 11,900 cases still waiting investigation.
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