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UK get heavy on tax dodgers

Watch out wealthy individuals and business people in the UK.

UK Treasury Chief Secretary Danny Alexander says their Government is putting GBP900m extra into combatting tax evasion. The goal is to collect an additional GBP7 billion by 2015.

Using new technology and a specialist cyber crimes unit tax investigators will target offshore tax evasion and alcohol and tobacco smuggling.

The tax department in the UK monitor the “tax gap” between what they estimate are the taxes owed and the taxes they actually collect. They reckon the gap is about GBP42 billion.

Of this, apparently the largest shortfall is in VAT where they estimate GBP15.2 billion of VAT owing is actually not collected.

That’s a staggering amount of money, although to put it in perspective, the budget deficit in the UK is GBP165 billion.

One of the measures aimed at reducing VAT evasion is the recently announced “reverse charge” for transactions involving mobile phones and other computer technology. It will mean companies in the UK buying these items will have to self assess the VAT rather than the vendor doing so. It prevents what is known as “carousel fraud” which apparently has been on the rise in the EU.

New Zealand’s IRD recently toyed with introducing a reverse charge for GST on land transactions. It would have meant a GST registered purchaser of land would account for the GST on the sale at the same time they claimed the GST credit for their purchase. The vendor would be out of the picture.

That proposal’s been dropped and instead, from 1 April next year, transactions involving land between GST registered entities will be “zero rated” for GST.

More on that later.

Iain

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