Meg Hillier, chair of the Commons public accounts committee, has called on HM Revenue and Customs to investigate claims of tax avoidance after leaked documents revealed how the super-rich invest vast sums in offshore tax havens.
Five senior officials from HMRC including chief executive Jon Thompson are to appear in front of the committee this afternoon to discuss the agency’s recent performance. Hillier said she expects “frank answers” from them on what they intend to do following the leak.
Trade union PCS meanwhile pointed to the “staggering” reduction in the number of tax officials despite the scale of tax avoidance, and renewed calls for the HMRC office closure programme to be halted.
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The so-called "Paradise Papers" – a mass leak of more than 13 million files – reveal how wealthy individuals and organisations use complex structures of trusts, foundations and shell companies to protect their cash from tax officials.
Hillier said: “British taxpayers will be rightly outraged by the content of these disclosures. Every pound moved offshore to avoid paying tax deprives public services of vital funds.
“The government talks tough about clamping down on aggressive tax avoidance but once again we see HM Revenue and Customs being out-manoeuvred. HMRC must investigate the very worrying allegations arising from this leak.
“These transactions are taking place behind a veil of secrecy and, whether they are legal or not, we all have a duty to contribute to public services through our taxes.”
Hillier will question Thompson, who also serves as HMRC’s permanent secretary, chief financial officer Justin Holliday and three directors general at a PAC hearing this afternoon.
Mark Serwotka, general secretary of PCS, the biggest civil service trade union, said the papers highlight the scale of tax avoidance and evasion.
“With a tax gap of £120bn made up of avoided, evaded and uncollected tax demonstrating the tax justice crisis the government faces, it is staggering that HMRC staff numbers have halved in the past few years resulting in the loss of thousands of experienced tax inspectors across the country.
“One practical step the government could take is to immediately halt the HMRC office closure programme. To continue with these closures and the subsequent loss of more experienced staff would indicate they have no interest in tackling these vital issues.”
The tax agency’s plan to shut around 170 regional offices and replace them with 13 regional hubs has also proved contentious with the PAC, which told HMRC to rethink the plan in April.
Among those identified as beneficiaries of tax avoidance schemes in the first tranche of Paradise Papers revelations are the Queen, Conservative Party donor Lord Ashcroft and Everton Football Club.
Around £10m of the Queen's money was put into funds in the Cayman Islands and Bermuda by the Duchy of Lancaster, which provides the monarch with an income.
The practice is not illegal, and Buckingham Palace has insisted no tax was avoided, but critics will question whether the head of state should be involved in such activities.
Labour has accused the government of turning a blind eye to "industrial scale" tax avoidance, with shadow chancellor John McDonnell demanding that the prime minister or the chancellor “explain how this scandalous behaviour has been allowed to go on unaddressed for so long and what action is to be taken now”.
Liberal Democrat leader Vince Cable said tax “should not be an optional extra for the global elite” and citizens who pay their taxes need confidence that the system is fair.
He added: “But the Paradise Papers suggest that a small number of wealthy individuals have been able, entirely legally, to put their money beyond the reach of the exchequer.
"Given these revelations, including news that Conservative donors benefited from these arrangements, we need a parliamentary select committee to investigate fully who decided what and why.
“In particular, we need the release of all government papers dealing with the decision not to clamp down on off-shore tax havens. Only in this way can we ensure there is full public confidence in the tax system.”