Internet traders are among the two million people
believed to be cheating on their taxes in the booming cash-based
black economy.
The
Public Account Committee (PAC) said today it regarded
individual internet traders, some self-employed people, such as
taxi drivers, hairdressers, builders and decorators, and buy-to-let
landlords, as "at risk".
PAC chairman Edward Leigh said HM Revenue & Customs (HMRC)
was apparently making little ground in fighting the UK's
cash-in-hand culture, which it estimates costs the country more
than £2bn a year in lost taxes.
"With a detection rate of only 1.5%, the chances of being caught
are very slight," Leigh said. For those who are caught, the
penalties imposed average only 3% of the tax detected. HMRC
prosecutes only two cases out of a thousand, he said.
HMRC said it was using more data matching to detect suspicious
discrepancies between the data it held on people and other data
sources, such as the Yellow Pages and Driver & Vehicle
Licensing Authority.
It also said an advertising campaign to encourage people to blow
the whistle on tax cheats had misfired. Most of the information
received had been on individual "ghosts" and "moonlighters", where
the tax at stake was less than it would have been for employers and
small businesses. As a result, HMRC collected only £2.6m of an
expected £32.5m.
HMRC spent £41m in 2006-07 to get people and businesses into the
formal economy, and detecting and imposing sanctions on those
operating in the hidden economy. It uncovered unpaid taxes worth
£145m in that time.