Page last updated at 17:01 GMT, Wednesday, 11 June 2008 18:01 UK

Malicious calls swamp tax hotline

A tax return form
The hotline was launched in 2006

A hotline set up to catch income tax cheats has been flooded with calls from people making malicious and unfounded allegations, MPs have been told.

One woman made 68 calls to report her husband - none of which had led to an investigation, the Public Accounts Committee was told.

Dave Hartnett, acting chairman of HM Revenue and Customs, said he was "disappointed by the quality" of calls.

But he said figures for the current year had shown an improvement.

Mr Hartnett told the committee there were up to two million people in the "hidden economy" in the UK - about 80% of whom were "small time" tax evaders in low paid jobs such as hairdressing, gardening or cleaning.

But there were also examples of higher earning offenders, including medical consultants and 57 barristers who were "in the hidden economy at some time not paying any tax".

'Low number'

The committee was told 28,000 people were investigated each year - but Mr Hartnett denied claims by chairman Edward Leigh that the chance of being caught were "virtually nil".

He said "we are getting better and better at catching people" but conceded that only two cases per thousand were successfully prosecuted.

There are undoubtedly callers to our evasion hotline who think that by simply calling the line whatever they say, accurate or inaccurate, they can cause pain to somebody
Dave Hartnett
Acting chairman HM Revenue and Customs

"It is a low number and we do have plans to increase it," he told the committee.

He said there had been 2,000 completed investigations from 120,000 calls to the tax evasion hotline.

The hotline was launched in 2006 with television and radio adverts. It is aimed at catching income tax, corporation tax, capital gains tax, VAT, National Insurance and inheritance tax cheats and was modelled on the Department for Work and Pensions benefit cheat hotline.

Its website promises anonymity for informers and says: "With your help, we'll make sure people who are not registered for tax have nowhere to hide."

But according to a National Audit Office report it was the least cost-effective detection method, with the yield being only twice the cost of operating it, the committee was told.

"We get an awful lot of information on the hotline and it's important for us to risk assess it properly, not to trouble people where there is no reason to trouble them," Mr Hartnett told the MPs.

'Snitching disease'

Part of the problem was people "snitching" on their "next door neighbours" without having any concrete evidence, said Mr Hartnett.

"I am not sure whether snitching is a particular English disease or not but there are undoubtedly callers to our evasion hotline who think that by simply calling the line whatever they say, accurate or inaccurate, they can cause pain to somebody.

"I think it would be fair for us to say we have been a bit disappointed by the quality of some of the calls, which has made it hard for us to justify starting an investigation."

But yet-to-be published figures for 2007/08 showed a much higher success rate than the previous year from hotline tip-offs, said Mr Hartnett.

Nail bars

An expected tenfold increase in the amount of tax recovered by HMRC from 7m to 77m due to new money laundering laws had not materialised, he added.

Mr Hartnett also gave the MPs an insight into some of the techniques used by investigators.

He said new areas were constantly being discovered where self-employed and small business people were evading income tax - using the example of nail bars to to illustrate his point.

"Nail bars are part of the fashion trade and we are finding it is quite astonishing. Quite a lot of them aren't known to us and we have nail bar investigations involving over a million pound in tax."

He said HMRC investigators used "data matching" techniques but also scanned the Yellow Pages for new nail bars rather than waiting for local tax inspectors to report them.

Inspectors also went after high value tax evaders by keeping an eye on individuals who were buying expensive cars or boats.

Asked if the inspectors were dressed appropriately when visiting harbours, Mr Hartnett said he hoped they looked "relaxed" but were not "dressed as Matelots".


SEE ALSO
The fight against tax evasion
03 Apr 08 |  Business
Revenue tactics 'more effective'
02 Apr 08 |  Business

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