Middle-class families could be forced to undergo lie detector tests as part of a major crackdown on tax avoidance being spearheaded by Nick Clegg.
Tens of thousands will face intrusive new tax investigations under the plans unveiled by the Deputy Prime Minister yesterday.
As part of a two-pronged attack on the better-off, millions more will face cuts in benefits, such as winter fuel payments, child benefit and free bus passes.
The moves, unveiled at the Liberal Democrat conference, were designed to guarantee Mr Clegg’s popularity with mutinous grassroots members, but were described by critics as ‘bully boy tactics’.
The crackdown will affect thousands of ordinary small business owners, whose enterprise is desperately needed to help pull Britain out of recession.
Today Mr Clegg will accuse middle class earners who pay accountants to minimise their tax bills of behaving like ‘benefit cheats’.
He will say that legal tax avoidance and illegal evasion are ‘just as bad’ as falsely claiming benefits, adding: ‘Both come down to stealing money from your neighbours.’
Tax evasion by the better off is to be aggressively pursued in a £900million drive which will see the number of people targeted for tax checks rise from 5,000 a year to 150,000.
Half of all the people paying the new 50p top rate of tax will have their tax affairs raked over by a dedicated team of investigators every year.
Lib Dem sources said the number of criminal prosecutions would increase five-fold.
The tax crackdown will be undertaken by HM Revenue and Customs, the beleaguered department which recently admitted getting the tax codes of millions of workers wrong.
A team of investigators will be created to catch those hiding money offshore.
They will use the benefits fraud model, which does include the use of lie detectors, as a template for what action they can take.
‘Voice recognition analysis’, which picks up when a caller sounds nervous on the phone, could be used to help work out if someone is misleading tax inspectors.
Private debt collection companies will be used to chase up £1billion of tax debt and HMRC will also get more staff to boost its tax collection.
The Treasury said the initiative could bring in £7billion a year by 2015.
The decision to chase those who illegally evade tax is uncontroversial.
But ministers yesterday appeared to blur the distinction between criminals and ordinary people who try to minimise their tax bill by legal means, or ‘avoidance’.
The detail of the tax crackdown was announced by the Lib Dem Treasury Chief Secretary Danny Alexander, who himself used a legal dodge to avoid paying thousands in capital gains tax on his second home.
He said that both legal tax avoidance and illegal tax evasion were unacceptable and ‘morally indefensible’. Matt Sinclair of the TaxPayers’ Alliance said Mr Clegg was ‘barking up the wrong tree by targeting legitimate tax planning’.
He said: ‘We should all pay the tax we owe the Government, but individuals shouldn’t be punished for arranging their affairs to avoid paying excessive tax. This principle applies to families worried about inheritance tax and entrepreneurs setting up new businesses.
‘We won’t get out of this economic rut by punishing the people who provide jobs and create Britain’s wealth. Bully boy tax inspectors are not the solution.’
Mr Clegg also gave the strongest hint yet that next month’s spending review will involve a bonfire of middle class benefits to minimise the ‘unfair’ impact on the poorest.
The Deputy Prime Minister, who earns £134,565 and is married to a high-flying City lawyer, said he would be happy to give up his family’s £2,450-a-year child benefit payments.
He said it was right that those who were ‘not so much in need’ should share the pain of the deficit reduction programme.
As part of a wider review of welfare spending, ministers also have to ‘look at benefits that go high up the income scale’. Mr Clegg ruled out suggestions that he might lead his party into an electoral pact with the Conservatives at the next election.
He told activists that the party would fight every seat, and he said he was ‘intensely relaxed’ about fears that the party would lose its identity.