Sarah Saunders

Written by:

Sarah Saunders

Personal Tax Manager

Is naming and shaming tax defaulters an effective tax evasion deterrent?

If a taxpayer is found, after an HMRC investigation, to have made a deliberate error; not fully cooperated with the process; and where the potential loss of tax is greater than £25,000, HMRC can publish details of the tax defaulter, identifying them on HMRC’s website for a period of twelve months.

HMRC commissioned a recent report to see how effective this punishment was perceived to be and the results are interesting. The findings show:

  • only 28 per cent of the public were even aware that naming and shaming was a possible consequence of tax evasion, highlighting that 72 per cent are unaware of the risk, thus limiting its deterrent value;
  • 59 per cent of the public said they thought it would be an effective deterrent, but only 43 per cent said they would avoid dealing with a business which had been named; and
  • only 13 per cent said they would stop socialising with somebody who had been named.

Only 39 per cent of the public felt naming and shaming was proportionate and there was a perception that this would disproportionately target small and medium businesses.

Defaulters who had been identified were also interviewed. They were concerned that HMRC did not seem to effectively differentiate between deliberate actions and simple errors. Worryingly none of the defaulters interviewed seemed to be aware that they could make representations against publication. Some claimed to be unaware their details had been published. Indeed, for the defaulters, often facing substantial tax bills and fines, publication was seen as the least of their worries.

Overall, for many defaulters the current naming and shaming regime seems to be of relatively little concern, whilst the lack of awareness stops it having deterrent value for others. For most individuals and businesses, potential issues may come from unexpected sources, such as banks and other lenders checking the list independently for credit checks; reference to the HMRC website appearing when somebody carries out an internet search for another reason such as employment; or a journalist reporting on the news.

As things currently stand, for many people, these problems seem insignificant. To make ‘naming and shaming’ more effective, HMRC may need to be more targeted through advertising or social media to raise the profile of the ‘naming and shaming’ risk. If they do this people currently regarding publication as irrelevant may get a nasty shock.

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