What is the likely impact of extending the inaccuracy penalties?
Research suggests that a significant proportion of inaccuracies in returns are made despite the taxpayer taking reasonable care, for which no penalty would be due under the new regime. There is a gap in existing penalties for Excise Duties, environmental taxes and Insurance Premium Taxes around failing to take reasonable care. The new penalties will fill that gap and should stimulate a change in behaviour so more people will become voluntarily compliant. Where someone deliberately understates their tax liability, penalties will be higher than at present. This is an important deterrent to remove the unfair competitive advantage that otherwise would be gained.
