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EDITIONS
 Sunday, 29 December, 2002, 12:11 GMT
Gloves come off in UK tax hunt
Inland Revenue building entrance
Big businesses that dodge UK taxes are in the firing line of a new offensive from the Inland Revenue, its chairman has told the Sunday Times.

In an interview with the paper, top taxman Sir Nicholas Montague said that among the ranks of the UK's top corporations there was a "determined hard core of (tax) evaders".

"Some large companies are exploring forms of avoidance that they may think legal but we think illegal," he told the paper.

With 50 new inspectors hired at a cost of 3m ($4.8m), and new anti-money laundering regulations which make access to offshore account details much easier, they will be pursued "ruthlessly", he said.

The Revenue has found its reputation on corporate tax-dodging badly tarnished in recent months.

In September, BBC News Online revealed that it had sold off 600 buildings in a leaseback deal to a firm based in the tax haven of Bermuda.

Transferring money and assets between subsidiaries, some of which are in tax havens, is a common ploy among accountants and companies wanting to "minimise tax exposure", as the jargon has it.

The tactic, known as "transfer pricing", re-prices services and assets so that units in high-tax places make a loss, or at least a sharply curtailed profit, while the gains appear in a low-tax jurisdiction.

In front of a Parliamentary committee in December, Sir Nicholas admitted the Inland Revenue had held back information about the deal from Parliament and the public.

He also said the Revenue had effectively underwritten the firm's risk on the contract.

Charmless

Sir Nicholas' organisation has also been under fire for taking too soft a line with corporate wrongdoers.

The Large Business Office (LBO), which investigates multinationals, caught only 1.5bn in extra corporation tax in 2001, down from 2.1bn a year earlier, and on estimated avoidance of 20bn a year.

It also embarked on a "charm offensive", trying to get businesses to co-operate - only to find that they were no more willing to shop themselves than before.

Empty coffers

But the weakening economy means the Treasury is fighting a shortfall in tax revenues, with corporate tax receipts for October down 28% on last year and public borrowing climbing fast.

With that in mind, Sir Nicholas told the Sunday Times that the days of the soft touch were long gone.

There are 74 cases outstanding against big corporates, he said.

He highlighted one case against "transfer pricing" which netted an extra 100m.

And more attention is going to be paid to company bosses, checking out their massive pay awards for potential tax dodging, he warned.

But computer problems are still dogging the Revenue.

And the New Year will bring a National Audit Office report, which could indicate that - as in the US - tax dodging by individuals as well as companies is fast on the up.

See also:

12 Dec 02 | Business
27 Nov 02 | Politics
24 Nov 02 | Business
20 Nov 02 | Business
23 Sep 02 | Business
18 Apr 02 | Business
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