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Social security benefits come in many shapes, including the state pension, pension credits, income support, disability living allowance, employment and support allowance, jobseeker’s allowances and housing benefits.
- The total cost of all benefits for 2013-14 is about £164 billion.
- Around £1.2 billion or 0.7 per cent of the total is attributed to fraud. ‘
- Benefit fraud has continued to average between 0.6 per cent and 0.8 per cent for the period 2005/06 to 20013/14.
The government has set up a benefit fraud hotline and people are encouraged the blow the whistle on their neighbours and anyone else suspected of fraud. The sanctions:
- a £50 spot fine, without a court order, on individuals who mistakenly provide inaccurate information on their claims forms.
- Those suspected of fraud may be able to pay fines of between £350 and £2,000 in lieu for prosecution. From April 2015, the upper limit of the fine will be £5,000.
- Some may lose their benefits altogether for a fixed period.
- Private debt collection firms, bailiffs and forced house sales are used to collect penalties.
- Suspects can be charged under the Fraud Act 2006, which carries a maximum prison sentence of up to 10 years.
The data shows that most of the criminal convictions are for frauds of less than £10,000. In 2011, two-thirds of fines imposed were for £200 or less. The largest fine imposed was £5,000. For the period 2008-2012, some 1,306 offenders received a prison sentence.
Benefit fraud is officially estimated to cost £1.2 billion (2013-2014) but HMRC estimates an annual tax gap – that is tax avoidance, tax evasion and monies of £34 billion (2012-13).
HMRC’s model is challenged by others who put the tax gap at around £120 billion.
Even in 2004, a former World Bank adviser was saying that the UK is losing over £100 billion a year to tax avoidance and evasion. HMRC’s 2013-14 report states that during the year 421 individuals were detained after arrest by HMRC officers, but none were charged.
The amounts attributed by the government to tax avoidance and evasion are much larger than the amounts attributed to benefit fraud. But the number of prosecutions and convictions for benefit fraud are much greater.
The political culture is more sympathetic to tax avoiders. HMRC was made aware of the HSBC tax frauds in 2008, but so far only one person has been charged. An excuse offered by HMRC is that it likes to make financial recoveries and thus does not go for prosecutions.
The revolving door swings and tax avoiders go scot-free
We add that in 2013, just as the Treasury was under pressure to review rules allowing Vodafone to avoid paying tax on its massive £84bn windfall from selling its stake in the American mobile phone giant Verizon, HMRC appointed Mark Dearnley, CIO at Vodafone, as its new Chief Digital and Information Officer.
Sikka points out that, on a number of occasions, the courts have declared some of the tax avoidance schemes to be unlawful. This has not been followed-up by any investigation or even recovery of the cost of fighting the schemes. Big accountancy firms are often the brains behind the schemes but no firm or partner has ever been fined even after the schemes have been declared unlawful.
- The same firms are given taxpayer-funded contracts, such as those relating to privatisation and Private Finance Initiative (PFI).
- Their partners advise HM Treasury and other government departments.
- The firms fund political parties and also provide jobs for former and potential ministers.
In April 2013, the government introduced rules to ban companies and individuals who took part in failed tax avoidance schemes from being awarded government contracts. So far, no such business has been barred.
Posted in Civil servants, Conflict of interest, Corporate political nexus, Democracy undermined, Economy, Finance, Government, Lobbying, Parliamentary failure, Party funding, Planning, Revolving door, Reward for failure, Secret State, Taxpayers' money, Vested interests, Whistleblowers
Tags: benefit fraud, Big accountancy firms, HM Treasury, HMRC, HSBC, John Wight, Private Finance Initiative, Privatisation, Professor Prem Sikka, tax avoidance schemes, Tax evasion, Taxpayer funded contracts, Vodafone
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A reader sent this link to an article by John Wight – well worth reading in full – which crystallises the writer’s unease at the difference between HMRC’s treatment of poor tax or benefit defaulters and its leniency to the very rich.
As he writes: “The sheer scale of tax evasion on the part of the rich in the UK is staggering . . . in 2014 more than £80billion was lost to the Exchequer as a result of tax evasion in 2014 . . .
“At the other end of the social spectrum benefit fraud costs just over £1billion each year . . .”
Mr Wight refers to a two tier system of justice:
- Those found guilty of benefit fraud are maligned, shamed, and demonised.
- The rich found guilty of tax fraud are allowed to avoid the inconvenience of prosecution and court in return for an undisclosed pay off.
And adds that “more damning evidence of the extent to which the rich are ‘getting away with it’ is provided by the fact that despite the mammoth difference in cost to the UK taxpayer the resources that have been deployed to crack down on benefit fraud are exponentially more than tax evasion”.
“We have in Britain a government of the rich, by the rich, and for the rich, the consequences of which are tangible. With the advent of the worst economic crisis since the 1930s, caused by the greed and recklessness of the banks, the government has effected the transference of wealth from the poor to the rich under the rubric of austerity, a process measured in food banks, payday loans, benefit sanctions, the bedroom tax, and zero hours contracts at one end of the social and economic spectrum, alongside an increase in the wealth of the country’s 1000 richest people over the same period”.
Posted in Conflict of interest, Corporate political nexus, Democracy undermined, Economy, Finance, Government, Lobbying, Parliamentary failure, Planning, Public relations, Reward for failure, Taxpayers' money, Vested interests