Watchdog: Tax dodgers must be named

Tax dodgers should be "named and shamed" to discourage the rich and famous from exploiting legal loopholes to avoid paying billions to the Treasury, a spending watchdog has recommended.

Aggressive avoidance scheme promoters are "running rings" around HM Revenue and Customs, said the Public Accounts Committee.

It warned that the taxman is losing the "game of cat and mouse" to clients and promoters as they deliberately take advantage of the time it takes HMRC to shut down a particular avoidance method to make their money.

HMRC must start publicly listing promoters and those who use their schemes, the committee said.

Last year comedian Jimmy Carr admitted to making a "terrible error of judgment" after it emerged he used a complex scheme to reduce his tax bill. The K2 tax-avoidance scheme Carr is said to have used enabled members to pay income tax rates as low as 1%.

PAC chairwoman Margaret Hodge said: "Promoters of 'boutique' tax avoidance schemes, like the one brought to our attention by the case of Jimmy Carr, are running rings around HMRC.

"They create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those intended to encourage investment in British films, and then sign up as many clients as possible, knowing that it will take time for HMRC to change the law and shut the scheme down.

"Their clients can then take advantage of this window of opportunity to make a lot of money at the expense of the UK taxpayer, while the promoter simply moves on to a new scheme and repeats the process. It is a game of cat and mouse and HMRC is losing.

"It has allowed a system to evolve where the dice are loaded in favour of the promoters of tax avoidance schemes. The complexity of tax law creates opportunities for avoidance, there are no penalties to stop people promoting these schemes, and HMRC is ineffective in challenging promoters who are deliberately obstructive or deliberately sell schemes they know do not work.

"Promoters pocket their fees whether their schemes work or not."