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HMRC is prosecuting far fewer people for tax dodging than before the pandemic, an influential committee of MPs has warned.
Over the two pandemic years, the tax authority completed around 1,000 fewer prosecutions for tax-related offences than before the pandemic, a report by the influential Public Accounts Committee found.
In 2020–21 and 2021–22, it concluded just 163 and 236 prosecutions respectively, compared with around 700 a year in the two years before the pandemic.
While court backlogs impacted its ability to wrap up cases, HMRC told the committee that it was already reducing the number of prosecutions it brings, and it was not planning to restore the number of prosecutions back to pre-pandemic levels.
“HMRC told us this was because it considered that its criminal prosecution powers were best used to tackle the most serious and complex cases, rather than large volumes of smaller cases,” the report said.
HMRC “is not seriously concerned that the reduction might weaken the deterrent effect,” the report added.
“It argued that the publicity around high-profile convictions, as well as its use of other enforcement tools such as civil powers, is sufficient to maintain a credible deterrent. However, it does not have a way to monitor this,” the report said.
The report also found that the number of non-compliance cases opened by the UK’s tax authority fell by 32 percent to 1,114,000 for 2020-21.
“We need to see more effort from HMRC,” Dame Meg Hillier, PAC chairman, said. “It is simply not doing enough to deter and punish cheats, even at very high levels.”
“We cannot and must not arrive at a situation in the UK where it is easier to cheat the tax system than it is to comply with it,” she added.
A HMRC spokesperson said: “Our compliance work is on course to protect more in 2022/23 than in either of the previous two years.”
“The National Audit Office has recognised that our compliance work offers good value for money for the taxpayer,” the added.