£1b tax debt outsourced to private debt recovery agencies

Danny Alexander, the Lib Dem chief secretary to the Treasury, recently promised to shake up HMRC and his proposed clamp down, attention has been singled out on wealthy individuals and business who thought paying extra tax was an optional extra.

Also high on the agenda are criminal gangs committing tax fraud such as VAT scams and on those not paying taxes when due. The shake up included setting up a new practice of using private debt recovery firms to pursue tax debts owed to HMRC.

The clamp down comes on the back of stark warnings from a former government adviser who warned that official action to tackle tax avoidance and fraud is just “a drop in the ocean”.  John Christensen, former economic adviser to the UK and Jersey governments believes almost £120bn to be lost annually. This amount is almost twice that estimated by Revenue and Customs.

On learning of Lib Dem Alexander’s proposed government to raise an extra £7bn by 2014-15 by tackling tax avoidance and frauds, Christensen dismissed them as being “too timid” and went on to say that the UK led the world in tax avoidance and cited half of all ‘tax heavens’ around the world as being British.

The Treasury estimates evasion alone costs £7bn a year in uncollected tax revenues, while avoidance costs roughly the same. Attacks on the tax system by organised criminals are estimated to cost around £5bn.

But Christensen claimed the true scale was far higher, citing annual figures of £26bn in uncollected revenue, £25bn lost annually through tax avoidance, and a further a further £70bn in tax a by large companies and wealthy individuals. Christensen cited one such tax avoidance mechanism that allowed large companies such as supermarket chains and online retailers to avoid VAT on items worth £18.50 or less by shipping products such as DVDs and CDs to Guernsey and Jersey before posting them back to the UK for sale.

The plans to shake up HMRC investigations will be funded by a ringfenced investment of £900m, which will cover the spending round and is separate from any final deal imposed on Revenue and Customs in the spending review due on 20 October.

With Alexander also promising to contract out up to £1bn of tax debt per year to private sector debt collection agencies it signals the Treasury is getting tough and finally thinking about working smarter in collecting what is due to them.

CCDR (Corporate Credit Debt Recovery Ltd) is a leading UK Debt Recovery and Debt Collection specialist with international reach and a client base of SME’s and Eurozone multinational organisations. Our head office is in Liverpool

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