Tax avoidance costs UK treasury £5 billion a year: Labour MP

The loss to the UK exchequer due to the taxman not cracking down on ''morally wrong'' tax avoidance schemes has been estimated at £5 billion a year the Commons' public accounts committee warned today.

According to Margaret Hodge, former Labour minister, rich businessmen designing the schemes were "running rings" around HMRC.

She pointed out that HMRC had an "appallingly bad record" at catching tax cheats, with just 11 people fined for promoting tax avoidance since 2004 – though 10,000 people a year were reporting tax avoidance schemes.

According to a report by the PAC published today, there was "a lot of money to be made in selling avoidance schemes", and commissions paid to the creators of the schemes could be up to 20 per cent of the tax saved.

Hodge said, there had been huge growth, and appalling proliferation [in tax avoidance], and the HMRC was doing little, having taken only 11 cases to tax tribunals.

Hodge called on HMRC to "robustly" crack down on tax avoidance promoters that were "costing the country billions, as the public was struggling with less money in their pockets". She added that it offended the sense of fairness.