Sturgeon demands zero tolerance on obscene and despicable tax avoidance

The First Minister said "a whole political establishment" had negligently allowed tax avoidance to become routine, even though it robbed public services of essential funding.

She said people should be "unequivocal about how obscene and immoral and downright wrong" it was to dodge tax, however it was done.

"The first step is to have a zero tolerance approach to it and then to have a much more vigorous and effective tax authority that's going to clamp down on it and prosecute people, and get money back and make examples of people, so we send the right message to anyone thinking of doing it.

"It is awful, it is despicable, I can't actually think of words strong enough for it, and the sooner we start calling it for what it is, the sooner we might start to see it tackled and tackled effectively."

The outspoken remarks were prompted by claims last week that HSBC's Swiss private bank helped thousands of clients illegally evade tax.

Data leaked to HM Revenue & Customs (HMRC) in 2010 identified 7,000 British clients at the bank, around 1,100 of whom had not paid their taxes, yet HMRC brought just a single prosecution, preferring to accept £135m in tax and penalties.

One HSBC client was former Tory treasurer Lord Fink, who was accused by Labour leader Ed Miliband in the Commons of tax avoidance.

Fink, a multimillionaire former hedge fund manager, admitted he had taken measures at the "vanilla, bland, end of the spectrum" in Switzerland, by using family trusts to legally reduce his tax liabilities, but denied tax evasion, which is criminal.

"The expression tax avoidance is so wide that everyone does tax avoidance at some level," he said in an interview on Thursday.

Miliband yesterday promised a new Labour government would begin an immediate probe into multi-billion pound tax avoidance claims by wealthy firms, and an "aggressive" review into culture and practices at HMRC.

Sturgeon's comments add to the common ground between Labour and the SNP which could help them collaborate in a hung parliament.

Scotland's fledgling tax collection agency, Revenue Scotland, has already signalled it will take a tougher line on tax avoidance than HMRC.

It will apply a General Anti-Avoidance Rule to all devolved taxes, blocking "artificial" tax arrangements invented purely to cut bills.

HMRC's version applies only to "abusive" tax schemes rather than simply artificial ones.

HMRC must also apply to an independent panel to stop abusive schemes, whereas Revenue Scotland will act on its own initiative.

So far, Revenue Scotland oversees only two devolved taxes, but its remit is expected to grow as more tax powers are devolved.

From April, it will collect and enforce payment of a new Landfill Tax and the Land & Buildings Transaction Tax, which replaces stamp duty, which together are worth around £550m a year.

From April 2016, Holyrood will also set all rates of income tax, worth around £10bn.

However the collection and enforcement for income tax will remain with HMRC.

Scottish Government sources last night said the shortcomings at HMRC over collection and enforcement underlined the need to devolve income tax in its entirety to Scotland.

Isobel d'Inverno, director of corporate tax at Brodies LLP, said the Scottish Government had "set its face firmly against tax avoidance".

She said: "The general anti-avoidance rule that we have got in the Scottish legislation is much fiercer than the UK one. It's a very much firmer 'Keep off the grass' sign than the UK one is.

"Revenue Scotland also appears very determined to collect all the tax that is due.

"There's a whole series of different things that suggests they're going to have a far more pro-active approach to stopping tax avoidance.

"There's definitely a different climate here."

Dave Watson, Scottish regional organiser for Unison, welcomed Sturgeon's remarks but said ministers should also stop tax dodging companies from winning government contracts.

He said companies' tax practices should be assessed as a factor in the government's procurement regime, sending a clear message to firms that they could be shut out from £11bn of government work each year if they dodged tax.

Sturgeon's previously unreported comments were made in a Q&A session at University College London last week, after she gave a speech on economic alternatives to austerity.

Miliband told the Welsh Labour conference in Swansea yesterday that HMRC needed to do a "much better job" and accused the Coalition of "shrugging its shoulders" on tax avoidance which left a £34bn hole in the UK's finances.

"The Government's failure to tackle tax avoidance is no accident," he said.

"It has turned a blind eye to tax avoidance because it thinks that so long as a few at the top do well, the country succeeds.

"It thinks that wealth and power fence people off from responsibility. It thinks the rules only apply to everybody else.

"We will act because we have a different vision of how our country succeeds."

A Conservative spokesman said David Cameron had been fixing Labour's record of tax failure.

"The culture and practices of HMRC went wrong under Labour - when top bankers paid lower tax rates than their cleaners, foreigners didn't pay capital gains tax and the richest people routinely avoided paying stamp duty."

It was also announced yesterday that Lord Green, the former Tory trade minister who was chair of HSBC from 2006 to 2010, had quit with immediate effect as chair of a financial services industry body, TheCityUK's Advisory Council.

The organisation said Green was "a man of great personal integrity" who didn't want to damage the effectiveness of TheCityUK "in promoting good governance and doing the right thing".