Today a report commissioned by the TUC uncovers the extent of tax avoidance by the wealthy and by companies. Exhaustive scrutiny of the company reports of the FTSE 50 firms over the past seven years reveals how little tax they actually paid due to tax avoidance - 22.5%, not the 30% parliament has fixed. The Missing Billions finds that the public purse is bilked of £13bn a year by wealthy individuals and another £12bn a year by corporations. That missing £25bn is urgently needed when the Institute for Fiscal Studies (IFS) predicts the government will breach its self-imposed ceiling in public sector debt by £8bn. As local government feels the pinch, with real cuts ahead in the next financial year, tax avoidance on this scale is intolerable. The report proposes a minimum tax rate for £100,000-earners to stop spurious expenses claims and fiddles - and an overarching anti-avoidance principle to end these cat-and-mouse "tax planning" games with the revenue. As it is, thousands of tax-chasing jobs are being cut.
Devising loopholes is a vast tax-avoidance industry, creating ever more complexity in the tax system as they spring up as fast as the revenue closes them down. Yet the CBI protests disingenuously at the ever-increasing volumes of tax law. Here's an example: one of the more startling revelations in this report concerns tax from investments paid by individuals. How can it be that half of all investment tax is paid by people who are apparently very low earners, or non-earners? These are all people in the bottom half of the income distribution, although 93% of wealth is owned by the top half of the population. It's a statistical impossibility. So who are these apparently low-income poor folk with enormous reservoirs of investments?
The explanation is widespread income shifting by the wealthy to their non-earning spouses and children as a way of avoiding tax and national insurance. All in all, with clever use of expense allowances, those earning £100,000 are able to claim 10% - £10,000 - in tax relief, while those earning £30,000 claim only 4%, or £1,200. Read this report for eye-opening details of chiselling by companies large and small. Many ruses are highly technical, describing myriad ways companies cheat, such as declaring their costs in the UK and their profits in a country with much lower taxes.
Unlike the comments I've already heard and seen from accountants and the CBI Polly has bothered to read and think about this report before saying it raises issues that need to be addressed. And she's right a well; there is only one reason why they aren't being addressed, and that's cowardice.