A city law firm has criticised HM Revenue and Customs (HMRC) for paying informants to provide details on possible tax evasion, saying there were "ethical risks" tied to the practice.
RPC said the practice of paying informants opened up the risk of increased data theft as disgruntled employees with an axe to grind could be persuaded into leaking information. HMRC paid informants more than £343,000 for intelligence on potential tax evasion in 2017/18.
The practice is not only used in corporate settings: it has been used by HMRC to receive information from couples on the brink of divorce about the finances of their partner after relations have broken down.
In both cases, there was the risk that false or misleading information could be passed on to the authorities who may then open up an unnecessary investigation, RPC said.
RPC tax partner Adam Craggs said: “Concerns have been raised that paying informants for intelligence on tax evasion might appear to legitimise data theft, raising both legal and ethical issues.
“HMRC appear to be willing to utilise any information that they receive, irrespective of its provenance, as they did when they received stolen data from HSBC Suisse. It seems that as long as the data may increases the tax yield, HMRC will utilise it.”
HMRC has been ramping up its crackdown in recent years following a wave of public anger at large corporations such as Apple and Amazon avoiding tax. This year, the retail giant paid a tax bill of just £1.7m, despite reporting a turnover of £2bn. Amazon has said it paid all the taxes required by UK law.
A spokesperson for HMRC said: "It is only right that people who have information that could help us to investigate tax evasion are able to get that information to us quickly and easily. The vast majority of people pay their taxes and rightly expect us to tackle the minority who seek to evade making their lawful contribution to our vital public services.
"All personal data is protected by law and our fraud hotline operates within that important legislation."
Other practices employed by HMRC to claw back tax receipts have also come under scrutiny. They include having the power to take money directly from a taxpayer's bank account; accelerated payment notices, whereby HMRC can demand the payment of a tax bill within 90 days and without first establishing in a tax tribunal whether tax is liable; and the use of private sector debt collectors who are known to adopt aggressive methods in tax collection.