Why are the right so frightened of the tax gap?

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I was amused when debating the subject of the tax gap with Michael Fallon MP on Jeff Randall’s Sky TV programme last evening.

Fallon tied himself in knots. He claimed my numbers were wrong. He claimed that the government would be delighted if it could recover 1% of my estimated total gap of £120 billion or so.

Then he claimed HMRC must be reformed. And PAYE must be reformed. And that the non-dom rule must be revised and a General Anti-avoidance Provision should be introduced. When I pointed out the last two were in the Coalition agenda because of Lib Dem policy and my discussions with Vince Cable had put them there he was even more confused. His last comment was “Richard is right”.

Quite so. But why his confusion on the way to reaching this obvious conclusion? I suggest that it’s because the right are very worried that the tax gap provides the left with a narrative that challenges their cuts agenda that they’d really rather ignore.

First it says there is an alternative to cuts. That’s obvious. I don’t for a moment suggest that £120 billion of tax can be collected and the tax gap closed. I live in the real world. But I do think £26 billion of outstanding debt could be reduced by £5 billion. I do think a General Anti-avoidance Provision, tackling the domicile rule, tackling residence abuse and tackling income shifting plus better rules on corporate residence could dramatically change the loss to tax avoidance and recover £8 billion a year — or one third of the tax avoidance gap. And I do think that tax evasion could be reduced by at least £7 billion a year — and probably somewhat more — if (and it’s an important if) enough resources were dedicated to the job.

That’s up to £20 billion of additional tax available meaning a whole raft of cuts — real cuts that will impose real pain on real people and leave our economy in the doldrums of recession and massive numbers of people in the despair of poverty and unemployment — can be avoided.

But there’s a second and as important point here. My argument makes an assumption which the Tories don’t want made explicit — and that is that I think that the government would do more good for society by spending this money in the way I have suggested than can be created by the tax fraudsters and abusers spending their ill-gotten gains as they do now. Those who challenge the tax gap analysis — and the Tories do - do not agree. They think that the free-riders on the back of society — the tax fraudsters and abusers — know how to spend money better than the government does. At the same time they’re saying it’s better that these cheats be allowed to spend their ill gotten gains than it is to provide the education, health care, pensions, benefits and protection from criminals that honest tax payers deserve.

This is the real reason why the Tories, in particular, do not want to face up to the size of the tax gap. If they did it would be obvious just how much they’re letting the cheats get away with.

And I’m explicit — when Michael Fallon dismisses my figures on the tax gap — when all the right wingers who comment on this blog say I don’t know what I’m talking about dismiss the same figures — figures which are however completely in line with best academic estimates of the UK shadow economy when their own are ludicrously low — I think they’re making a deliberate, but hidden, statement — which is that they’d rather the cheats have this money than the government.

And they do that for one reason — because they hate government. And they hate what it supplies.

They hate the fact that it supplies education and health for all.

They hate the fact that it provides a safety net in society — a safety net they want to remove.

They hate the fact that the state can provide some dignity in old age.

They hate the fact that the state could provide homes — good homes — for all who want them in our society.

They hate the fact that the state can provide the things most people seem to value so highly in our communities — safety, training, health, roads and public transport, the arts, vast ranges of entertainment and sports activity, and most of all — the freedom from fear of destitution if something goes seriously wrong with the best laid plans that all of us have.

That’s what the right are really saying when they dismiss the tax gap.

They’re saying — and let’s be explicit about this — that supporting fraud and abuse is more important than helping the old, the sick, the vulnerable and the young.

So let’s not pretend for one minute when they nit-pick the numbers, or say nothing can be done that this is their real message. Their real message is profoundly political — that they don’t want anything to be done. Because they prefer crime to justice.

The left doesn’t. We’re in favour of justice. We oppose crime. We believe that the state delivers real value for real people who need the services only the state can supply. And we believe all of us — everyone in society — is better off as a result. That’s the message we’re delivering when we say the tax gap has to be closed.

So let’s not for one moment think this issue is some minor technical side show. This is a message at the core of the difference between left and right, between the decency, honesty, justice, hope and the prospect of a better life for all that the left promotes and the corruption, nastiness, abuse, greed and despair the right stands for.

And they know that the narrative of the tax gap can expose all this.

No wonder they’re frightened.

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