A crackdown on offshore tax cheats has only recovered about a third of the £1bn that the government had predicted, according to estimates.



Figures from HM Revenue & Customs suggest that a series of measures to tackle offshore tax evasion will only bring in £349m a year – £650m a year less than had been hoped for.

Other measures aimed at closing tax avoidance loopholes have also failed to generate the revenues that had been expected, undermining assurances from ministers that were made following the Paradise Papers exposé.

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The figure appears in a list of updated estimates provided by HMRC to the independent Office for Budget Responsibility over the last two years and released under a freedom of information request by the Labour party.

The shadow chancellor, John McDonnell, said these figures exposed “the utter failure” of the government to ensure the super-rich and big corporations were paying their fair share in tax.



“This could be just the tip of the iceberg,” he said. McDonnell said that after the Paradise Papers revelations last year, the government had been quick to promise action but slow to deliver on it. “Now they have been shown to not even deliver on what they originally promise,” he said.

measures have been launched to tackle the use of offshore accounts to hide money from HMRC, including agreements with Switzerland, Liechtenstein and other low-tax regimes to recover unpaid tax.

In total, these measures were forecast to bring in an extra £997m a year to the Treasury. However, a new forecast in September 2017, after most of the measures had closed, downgraded that figure to £349m a year.

Labour says a total of 28 anti-avoidance measures introduced under the coalition and Conservative government were bringing in less than expected, and that the gap between the tax take originally expected from them and the revised forecasts totalled £2.1bn, or 25%.

Measures that are now expected to raise less than originally forecast include a package of moves to tackle base-erosion and profit-shifting, where companies artificially move profits to locations with low tax rates.

These, which included new taxes on diverted profits and royalties, were expected to bring in a total of £515m a year but are now expected to raise £175m less each year.

Accelerated payments, whereby investors in avoidance schemes are asked to pay any disputed tax upfront, were forecast to bring in £1.1bn annually, £154m more than the latest forecasts suggest has been raised.



Some measures have yielded more than the original forecasts predicted, and offset some of the £2.1bn difference. For instance, the sums raised through cracking down on the way company takeovers are structured have been revised up to 554% of the original forecast. Preventing companies from avoiding stamp duty by cancelling and reissuing shares during a takeover is forecast to make the Treasury £425m a year against an original figure of £65m.

McDonnell said the downwards revision of other forecasts showed the Conservatives were dragging their feet on tax avoidance. “Their failed action on this issue discloses that deep down tax avoidance for them is an acceptable practice for the super-rich and big business whose interests they serve,” he said.

“We need an urgent change of direction from Philip Hammond. It’s not acceptable any longer for our public services like the NHS to go on being underfunded, while the Tories refuse to take serious action to properly clamp down on tax avoidance and evasion.”

The party is calling on the government to adopt policies it laid out in its election manifesto last year, including open registers of company owners in the UK’s overseas territories and an immediate public inquiry into tax avoidance.

The FOI showed new laws and a taskforce to crack down on the use of offshore companies by property developers have raised less than hoped for, with new forecasts revised down by 26%, or £133m. However, the introduction of a higher stamp duty rate and capital gains tax on residential properties bought through offshore firms have been more profitable than predicted. The annual tax take from these measures was revised up from £68m to £208m.

In November, the prime minister, Theresa May, responded to the revelations of the Paradise Papers investigation by saying HMRC had brought in an extra £160bn in tax revenues since 2010.

A spokesman for the Treasury said: “The UK has one of the lowest tax gaps in the world and we continue to take action to ensure everyone pays the tax they owe. Since 2010, we have secured and protected over £175bn for our public services that would have otherwise gone unpaid.”

Jo Maugham QC, a tax specialist and director of the Good Law Project, said: “The true figures are even higher when you examine the full official data. It tells us three clear stories. First, HMRC have undershot yield estimates by much more - numbered in the billions of pounds - than these figures reveal.

“Second, that undershoot is concentrated in areas involving tax evasion - not avoidance - by the super rich.

“Third, HMRC, on occasion, admits to having just given up trying to collect this tax because it hasn’t been given the resources.”

