U.K. Parliament Slams Revenue & Customs for Lackadaisical Approach to Alcohol Duty Evasion
Britain's HM Revenue & Customs isn't doing nearly enough to fight alcohol duty evasion, the U.K. Parliament Commons Committee of Public Accounts said in a critical report published Aug. 29. The department launched a renewed strategy in 2010 to reduce the amount of tax lost each year to duty evasion, often through fraud which involves exporting duty-unpaid alcohol to the Continent which is then redirected to the U.K. and marketed with no duty paid, the panel said.
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HMRC collected £9.5 billion ($15 billion) from excise duties on alcohol in 2010-2011, but estimates a tax gap of up to £1.2 billion, it said. But the department has failed to estimate the tax gap for wine despite its commitment to do so, it said. The lack of information on the nature and scale of wine duty fraud undermines the basis on which HMRC directs resources to tackling wine duty evasion, and the department should get up to speed on the problem, lawmakers said. The report also faulted HMRC for lacking adequate information on the returns it obtains from investing in specific activities to make best use of the additional £917 million it plans to spend on cutting all kinds of tax avoidance and evasion, the report said.
HMRC is consulting on a range of measures to reduce alcohol duty fraud, but still doesn't fully understand the costs and benefits of its proposals, the report said. Nor does HMRC make the best use of intelligence and technology to detect and prevent alcohol duty evasion, it said. It urged the department to work more closely with the industry to learn more about legitimate export markets, and to improve how it works with the UK Border Force to gather intelligence on illegal alcohol exports. The panel also criticized the department for not using the full capabilities of the excise movement control system, which allows freight to be tracked across the EU and which could be used to target interventions and investigations better.
In addition, the low number of prosecutions for alcohol duty fraud suggests the department “may not be giving sufficient weight to the deterrent impact of pursuing perpetrators through the courts,” the report said. In the four years before 2009-2010, there were only about six convictions for alcohol duty fraud, it said. It urged HMRC to figure out how to get reliable information on the likely costs and benefits of prosecution, including the effect of successful cases in deterring organized crime.
HMRC is considering the findings, said Chief Executive Lin Homer. Tackling alcohol fraud is a priority and “our strategy increased the impact we have on fraud by over 50% in its first full year of operation,” she said in a statement. HMRC is building on that strategy by deploying additional staff and exploring new legislative and enforcement options, she said. The department's performance can be measured by the combined impact of civil and criminal proceedings on duty evasion, both of which rose significantly when the strategy was introduced, she said. HMRC continues to investigate cases criminally where it will maximize impact on the fraud, she said.