‘Great uncertainty’ over tax crackdown forecasts
Government forecasts for the amount it can recoup through closing tax loopholes are vulnerable to “great uncertainty”, MPs have said.
The Treasury Select Committee suggests these projections should be limited when drawing up budgets.
Reporting on last year’s Autumn Statement, the committee said projections for some previous schemes had been revised down heavily.
The government said it was considering the committee’s recommendations.
In December’s Autumn Statement Chancellor George Osborne pledged to raise £6.8bn from a crackdown on tax avoidance, evasion and fraud.
But the select committee notes several previous tax crackdowns have failed to reach their revenue targets.
It highlights a deal with the Swiss government to collect tax from UK citizens who had been hiding money in Swiss bank accounts.
The agreement, which came into force in January 2013, was originally projected to raise £5.3bn over six years.
By the Autumn Statement this had been revised down by almost two thirds, to £1.9bn.
“Given the great uncertainty that surrounds the fiscal effects of tax avoidance measures, the reduction in the estimated yield of the UK-Swiss tax agreement should not be a great surprise,” the committee report said.
The committee says the chancellor’s latest forecasts are “vulnerable to similar uncertainties”.
“This perennial problem has now assumed particular fiscal importance given the size of the revenue being forecast,” the report adds.
The committee suggests the Office for Budget Responsibility should report back on whether targets are being met.
Where that is not possible, the report continues, “it should limit the extent to which the government may account for such projected gains”.
A spokesman for the Treasury said it would consider the committee’s report before responding but added the OBR had certified that the costings in the Autumn Statement were reasonable given the information currently available.