The chancellor’s numbers at Autumn Statement 2013 on how much the taxman would yield from the 'largest ever' avoidance crackdown must be reviewed, as they are prone to “great uncertainty”.
Dealing this blow to George Osborne ahead of next week’s Budget, a group of MPs said his individual revenue projections in December’s package of anti-avoidance measures were “each vulnerable”.
The package, comprised of measures targeting £2.1billion from false self-employment, was calculated by the chancellor to raise £6.8bn (or £9bn when including proposals against tax fraud, error and evasion), the Treasury Select Committee says.
But the committee believes that the forecasts, including those relating to the false self-employment crackdown -- said to net £520m in 2014/15 alone, are “inherently extremely uncertain”.
The cross-party group of MPs took evidence from six sets of financial experts before drawing its conclusions, one of which states officials should “look again” at how the government accounts for projections from avoidance measures.
The Office of Budget Responsibility, which the MPs say should run such a review, has already conceded that the yield from anti-avoidance measures is “generally more uncertain that that from other policy measures.”
The OBR has also acknowledged that there is a limit to what can be learned from previous policies in determining whether costings on how much revenue an anti-avoidance measure will generate for the Exchequer are suitable.
Moreover, “even after the event it is often very difficult to establish how much a particular measure has raised,” Andrew Tyrie, chair of the Treasury Select Committee, said on Saturday.
He added: “The OBR should look again at how the government accounts for projected revenues, based on previous experience. Where that is not possible, it should limit the extent to which the government may account for such projected gains.”
Mr Tyrie wants lessons to be learnt from the huge shortfall in revenue from a UK-Swiss tax deal, which was originally projected to raise £5.3bn but is now expected to raise only £1.9bn over the next five years.
“Forecasts of additional revenue from many anti-avoidance measures are inherently extremely uncertain,” he reflected, citing the package unveiled in December.
committee warned in its report on the Autumn
Statement 2012 that the forecast revenues from the UK-Swiss
agreement…were subject to uncertainty and that the proceeds may not meet
expectations. These concerns appear to have been justified.”