Tax cheats face worldwide war

Tax cheats face worldwide war

Britain, the United States, Canada and Australia yesterday announced plans for a joint clampdown on tax avoidance intended to save billions of pounds in lost revenue following a secret meeting of top officials in Virginia.

In what UK sources described as a "Christmas list" of practical cooperation, experts from the four countries agreed to set up a New York-based task force to target avoidance dodges.

The talks were held under the cloak of the spring meetings of the World Bank and International Monetary Fund in Washington. Sources said that the new agency would be set up in the summer.

Staffed by anti-avoidance experts, the four countries believe the agreement will quickly reap dividends and help to reduce budget deficits. Britain and the US are confident that the scheme will become a template for other countries to use and could eventually cover all 30 rich western countries in the Organisation for Economic Cooperation and Development.

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In Britain's case, the Treasury is seeking ways of cracking down on the £10bn-15bn a year estimated to be lost to the Inland Revenue and the £3bn annual shortfall in VAT receipts. Britain was represented at the talks in Williamsburg by Dave Hartnett, deputy chairman of the Inland Revenue with responsibility for tax avoidance, and Chris Tailby, head of VAT at Customs & Excise.

Gordon Brown is already planning a new regime in Britain under which companies would have to provide full disclosure of their tax policies and seek prior approval for avoidance measures.

One source said yesterday: "If the avoidance industry in the UK think we are getting tough they try their luck out here [the US]. The Americans are incredibly serious about this. We can learn a lot from them but we have practical expertise to share as well.

Mr Brown believes that it makes sense to supplement existing global cooperation on organised crime and fraud with a body that will concentrate on the tax avoidance industry. Four or five British experts will be members of the task force.

"This will massively enhance our radar capacity for identifying new schemes and - particularly for us and the Americans - spotting attempts to get around the disclosure regime."

Yesterday's agreement contained four main points, sources said. First, the task force will identify avoidance schemes and firms promoting them. It will analyse schemes to understand how they work and can be broken up.

Second, it will share expertise techniques and best practice in areas of legislation and penalties. Different company structures will be looked at for evidence of loopholes that need to be closed.

Third, there will be joint action to prevent companies exploiting differences in tax regimes between different countries. Officials said they wanted to stop avoidance schemes that played one country off against another.

Finally, the experts will conduct an in-depth study of the avoidance industry in an attempt to stay one step ahead of companies by anticipating emerging problems.

A treasury source said Britain had built up a globally envied expertise in identifying and uncovering schemes, partly because it had previously never had disclosure requirements or an anti-avoidance rule. Canada and Australia were particularly keen to learn from Britain about practical measures to maximise VAT receipts.

The US, he added, was acknowledged as expert on corporate tax and income tax avoidance, and on tax shelters. The Americans were "ahead of the game" in linking tax avoidance to corporate governance.

Guardian Unlimited © Guardian Newspapers Limited 2003