Plans for a Government blacklist naming and shaming tax cheats who have swindled the Exchequer out of over £25,000 could encourage further abuse, according to accountancy firm, PKF.
HMRC's campaign to publish a backlist comprising both companies and individuals who have "deliberately understated more than £25,000 of tax," could be used by tax inspectors to encourage taxpayers to accept HMRC's stance through fear of appearing on the list, says John Cassidy, tax investigations partner at PKF Accountants & Business Advisers.
Details published on the blacklist, designed to clamp down on tax avoidance and evasion will not only include the relevant names and numbers, but also the addresses and the business sector.
To avoid being blacklisted, companies and businesses alike will be given the opportunity to voluntarily disclose any tax owed and pay up under the second Offshore Disclosure Facility (ODF) which runs until March 2010.
Cassidy is concerned the blacklisting scheme could encourage an "element of vigilantism" plus an adverse reaction by business contacts leading to an "inevitable" fall in profits and tax.
"The Government needs every penny it can get at the moment so it seems odd that it is seeking to publicly embarrass defaulters, effectively encouraging them not to come forward voluntarily," says Cassidy.
"Furthermore, the announcement comes at the same time as the announcement for a new offshore initiative which is designed to encourage tax payers to do exactly that."
Ireland has used a similar scheme of naming and shaming since the 1980s and Darling reportedly believes it could raise millions of much-needed revenue from evaders reluctant to have their details disclosed.
The idea of naming and shaming defaulters was previously raised by HMRC as part of their four year review of powers, says Cassidy.
Having not been taken forward, now, two years later, he says the idea has appeared out of the blue.
"It would be interesting to see what statistical evidence there is to support the notion that publicising names in this way is effective - I somehow doubt that it exists."
Cassidy questions how long it will take before abuse kicks in.
"I am concerned that it will be used by enquiring tax inspectors to encourage taxpayers to accept HMRC's arguments under the fear of appearing on the list if they do not."
Cassidy believes the bar will need to be set "very high" to ensure the most serious of tax offenders are included.
"This new proposal discourages people with tax irregularities from coming forward, which cannot be a good thing, either for them or the Exchequer.IFAonline
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created