Panama Papers: Does HMRC have the resources to tackle offshore tax evasion?

HMRC asks for access to the Panama Papers offshore leaks and vows to "relentlessly pursue" wrongdoing – but tax expert Richard Murphy says department "just hasn’t got the resources"


By Jim Dunton

08 Apr 2016

HM Revenue & Customs’ ability live up to its pledge to “relentlessly pursue” tax evasion has been called into question by one expert in the wake of this week’s leak of vast amounts of data from tax haven Panama. 

More than 11 million documents taken from law firm Mossack Fonseca have shed new light on the tax practices of the world’s rich and powerful, and prompted embarrassment for prime minister David Cameron.

Following the revelations by the International Consortium of Investigative Journalists (ICIJ), HMRC director general of enforcement and compliance Jennie Granger has said the organisation is “committed to exposing and acting on financial wrongdoing”.


Civil servants "unfairly criticised" in Google tax row, says the FDA's Dave Penman
HMRC in Public Accounts Committee's firing line again after making "little or no progress"
HMRC announces major office closure programme – full regional breakdown and reaction


"We relentlessly pursue tax evaders to ensure that they pay every penny of taxes and fines they owe," she said. "There are no safe havens for tax evaders and no-one should be in any doubt that the days of hiding money offshore are gone."

The government had, she said, brought in £2bn from offshore tax evasion since 2010, with HMRC saying it is "following up thousands of leads on potential offshore evasion at any one time".

"The government has repeatedly strengthened our powers and resources with new criminal offences and higher penalties, so we can take even tougher action against the tiny minority who try to cheat the honest majority by hiding their money in offshore tax havens," the department said in a statement.

HMRC confirmed that it has also approached the ICIJ to share its information in order to cross-reference with its own "Connect" database.

However, independent tax investigator Richard Murphy – a founder of the Tax Justice Network – warned that HMRC did not have the resources to live up to those claims.

He pointed to one element of the Office for Budget Responsibility's report on the March Budget, detailing the downgrading of a 2013 “tax repatriation” target from Jersey, Guernsey and the Isle of Man from an anticipated £1.05bn to £370m for reasons including heavy staff workloads.

Murphy said that new Organisation for Economic Cooperation and Development information-sharing arrangements due to come into effect from January next year would also provide HMRC with rich new sources of data – but warned that the organisation would be unable to exploit that information without a significant influx of new staff.

“The demand is going to grow, but HMRC just hasn’t got the resources,” he told CSW. “It is one thing to legislate on tax compliance, but there’s no point in standing by and doing nothing once you’ve done that.

“Automatic information exchange and the common reporting standard will require hundreds of specially-trained staff to deal with effectively,” he said.

“I’ve not seen any evidence that there are resources or the intention to put them in place in time for January – the yield potential would be very, very big."

Pressed on Murphy's claim that the department would not have the resources to deal with the OECD data, an HMRC spokesperson told CSW: "HMRC has the expertise, technology and funding needed to analyse this data and carry out any investigations that come from it, and we were given an extra £800m at Summer Budget 2015 from the Treasury to invest in compliance and tax evasion work to recover £7.2 billion in tax over the next five years.

"Handling this volume of data is well within the resources and expertise of our 3,000-strong Risk and Intelligence Service, and we have around 500 highly-skilled and specialist staff in our Offshore, Corporate and Wealthy Division who work to claw back money from tax dodgers, working alongside 40 specialist offshore analysts, who carry out the complex technical analysis of offshore data sets such as this one."

Murphy also described HMRC’s request for ICIJ to share its Panama documentation as “embarrassing”, bearing in mind its claims to possess rich streams of data.

Last year, MPs on the Public Accounts Committee were sharply critical of HMRC’s performance on offshore tax evasion, and questioned its ability to report on the scale of aggressive tax avoidance.

At the height of the row over Google’s controversial £130m tax settlement, FDA general secretary Dave Penman also said HMRC officials had been "unfairly criticised", with ministers needing to commit appropriate funding to the organisation in order to get the long-term results required. The union declined to comment on the tax authority's response to the Panama revelations.

Read the most recent articles written by Jim Dunton - DfE ‘doesn’t know’ if free school meals voucher company made profit

Share this page