I wrote the following at the request of the Brighton Evening Argus for publication after the close of the UK Uncut trial in that city, in which I appeared as an expert witness to explain the links between tax avoidance and the cuts agenda of this government.
I regret that the judge, sitting as a magistrate, did not accept that the link was close enough to justify the actions taken during peaceful protest by UK Uncut supporters: equally I am pleased he appeared to accept the link existed but was simply not sufficiently immediate in his view on this occasion (which does of course beg the question when it might be, but let's leave that aside) and as such five of the nine charged were found guilty of criminal damage. That he gave them conditional discharges for six months does also suggest how trifling he thought the absurd case brought against them to be.
But, back to the Argus article:
Nine people from UK Uncut have been on trial in the last fortnight in Brighton for allegedly causing criminal damage during a protest in Brighton's Top Shop last December. The damage they're alleged to have caused was trivial and they admit they stuck themselves to the window of the store. The much more interesting issue is why they did it.
As a chartered accountant I appeared in court when asked to do so by their defence lawyer to explain just what the issues they were protesting about were. These are both complex in detail and relatively simple at the same time to explain.
Everyone knows that the UK is facing cuts at present and we are told they are inevitable. So benefits and pensions are being cut, school funding is down, hospitals are having budgets frozen, the arts and leisure are seeing cuts all over the place and the armed forces are having their numbers slashed. What I argue and what UK Uncut argue is that this is not as inevitable as it seems. There is, in fact, an alternative and it is one that the government is refusing to pursue.
That alternative is called ‘closing the tax gap'. The tax gap is the difference between the amount of tax which the law suggests should be paid in the UK and the amount actually paid. There are three parts to the tax gap. The first is the tax that tax payers have admitted they owe but which they then do not settle on time or at all. This amounts, according to H M Revenue & Customs to about £25 billion at present. If we got this money in the country would not have to borrow so much so it's a big deal.
The second part of the tax gap is tax that's evaded. Tax evasion is a criminal activity. It's what happens when people don't declare their income to H M Revenue & Customs or when they claim expenses to offset against their income to which they are not entitled. Of the two the first is the most important. Estimates of the total sum evaded each year vary. H M Revenue & Customs estimate the sum to be approximately £35 billion a year but there's good reason to think that's a serious underestimate. I think it's £70 billion a year.
The third component of the tax gap is tax avoidance. This is the element that most people find hardest to understand. Tax avoidance is not the act of claiming the allowances that you are entitled to in law. So, for example, claiming your personal allowances is not tax avoidance. Nor is paying money into a pension fund, or saving in an ISA. Tax avoidance is instead seeking to get around the law so that less tax is paid than Parliament intended on the economic activity that a person undertakes.
This “getting round” the law can be done in a number of ways but the most common is to find loopholes in UK law or between UK law and the law of other countries. These can be complicated; a lot of it involves offshore tax havens, and because it's expensive to set up it's largely done by the wealthy and multinational corporations. I estimate it costs the UK £25bn a year, split between individuals and companies.
So the tax gap is, I estimate, up to £120 billion. In fairness I should note H M Revenue & Customs do not agree, but because of my work they have published their own estimates, which come to £60 billion at present - exactly half of what I suggest. It's curious to note in this context that 'benefit fraud' is just over £1 billion a year — but is the issue to which all attention is given.
Either way, and whoever's figure for the tax gap is closer, it's an enormous amount of money. My figure would pay for most of the NHS. The point is collecting even some of this money — again whoever's estimate is closer — would eliminate the need for a lot of cuts — hence the name of UK Uncut. They are saying, and I have said for a long time that if only we collected the money due from tax cheats and crooks then we would either need many fewer cuts or we would not need tax increases. And what I have shown, sometimes working with politicians like Caroline Lucas, is that the measures needed to collect some of this tax are relatively simple, are quick to enact and would work.
Nothing though would work better than having more people on the job of collecting the tax owed to H M Revenue & Customs and yet extraordinarily at a time when the government needs every penny it can get in tax it is sacking tax staff as fast as it can. There were almost 100,000 HMRC staff in 2005: there will be 50,000 in 2015. Rarely has a policy designed to offer ‘savings' been so misguided. It's like a company facing a cash flow problem deciding to sack all its debt collectors. But the important point is this: that the government has not only decided to continue with this plan conceived when the economy as booking and it might have made sense, it is accelerating it.
As a result it is clear that the Coalition is choosing to leave money with the tax crooks and cheats instead of collecting it to pay pensions, educate children, fund the NHS, keep our armed forces armed and so much more. It's that choice that UK Uncut were highlighting — picking on Top Shop because Sir Philip Green's family are widely reported to have actively avoided £285 million of tax in one year in the mid noughties. He's just an example, nothing more. But the example is important: there's cash out there; this government needs it and UK Uncut and others expect them to collect it, now, for the sake of us all. And by demonstrating UK Uncut have made clear that this option is available, which is why I supported them by giving evidence during their trial.
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We do need to cut wasted government spending, which means we also cut government spending overall.
Only today we hear of the Passport Office spending almost 300 million over a 100 million budget. And lets not even begin discussing the 12 billion wasted by the government on the failed NHS project.
This waste of our money by the previous government is no better than tax evasion – a point UK Uncut conveniently ignore.
I agree – it really is time the private sector stopped selling products that don’t work
As much as they should stop wasting billions and maybe even trillions of shareholder funds on things like reckless lending or mergers like AOL and Time Warner
The scandal of private sector waste is endless
The point you seemed to have missed is that nobody is forcing you to buy a crap product from the private sector. If their products really are that bad they will go bust. Which is good because it means resources are allocated from inefficient ventures to more efficient ones. Which is how economies have advanced since the year dot.
Oh dear
You’ve not noticed too big to fail have you?
Please get off your blackboard and look at the real world
It helps
If that is the reason for the wasted expense, then the government will no doubt have a very good reason to sue for damages. I suspect this is not the case, the government has just continued drawing cheques on Joe Publics cheque book.
The difference between taxpayer funds being squandered by the government and shareholder funds being squandered by companies is pretty massive:
1. Shareholder funds are contributed voluntarily, tax is not.
2. The shareholders have a say in how their funds are utilized through the AGM – simple company law. Taxpayers have no say.
3. Directors who squander shareholder funds (and creditors too) run the real risk of being be found to have traded recklessly and receive appropriate sanction while Ministers and civil servants who waste our money just smile and wave.
a) People can leave country – or so you people say. Which means tax is voluntary
b) Shareholders have no management rights on funds at all
c) Directors aren’t voted out but ministers are
I think its worth making clear a key difference between benefit fraud & tax avoidance/evasion. At the risk of sterotyping, benefit fraudsters tend to spend the money they steal from the Govt in local pubs & shops & on eBay. In actual fact they probably recycle the money more efficiently than the Govt would !
Obviously that doesn’t make it acceptable, but the main damage done is only the ‘indirect; harm i.e that people think “if Gladys can live like that on IB why should I be going out working my guts out?”
By contrast with avoidance/evasion (& its worth noting that often the only difference between the two is how much HMRC could find out) the money tends not to be spent. It remains out there in secrecy jurisdictions, as a great wall of Gelt. This doesn’t just damage us in the first instance because its money that has been stolen from the UK exchequer but also in the 2nd instance because all this free Money has to go somewhere & usually its’ flow back & forth leads to exactly the sort of wild fluctuation that makes Greece go ‘Kaput’ & Swiss dairy producers lose their livelihoods etc.
Finally, of course, it has, much more powerfully, the ‘indirect harm because fund managers say to F.Ds “if X Ltd, which is similar to you, is paying no Corporation Tax, why are you?”
If it was not for the MSM and disinformation there would not even be the “If Gladys can live like that on IB.
Misreporting, and deliberate under-reporting lead to that.
The levels of benefit are available for anyone to see…and they are not high….the main point seems to be “she’s got a new car she must be loaded”
Welcome to Disability Living Allowance…some 51 pounds a week….which means you can either splash the cash (51 quid) or “invest” it in motability….effectively you rent a car for the money…you don’t get both cash and car. Fuel not included.
Nobody “lives” on benefits…except those both earning and claiming….and they are just plain crooks. And even crooks “recycle” the money through a range of consumer taxes, look at the MPs’ expenses….expensively recycled.
Excellent analysis of Tax Gap RM, and you can add another Chartered Accountant as your support in this area. My idea to to move the responsibility for the Tax Gap to a body independent of HM Revenue & Customs. I would also like to see more independent research into the Gap. By Independent I don’t mean, exclusively, Government cronies, but I also don’t mean left wing academic “usual suspects” either. Tax will always be political but it can be more open. Maybe we should go for a universal Tax Return system or publicise Tax Return data which does happen elsewhere in the world. Actually there is a surprising lack of debate between the merits of different international tax systems, even within the tax profession.
I think you’re treading on dangerous ground here, first by calling yourself an “expert witness” (you almost certainly aren’t) and then criticising the judge publicly after your side lost. Very unprofessional.
Am I an expert on this issue? Yes.
Was I called as an expert by the defence? Yes
Was I a witness? Yes
Was it therefore appropriate to use the term ‘expert witness’ in a blog. Yes, I think so
Was I described as such in court? I don’t recall
Does it matter? No
May I criticise the judge after the event and when it is clear that no appeal is likely? Yes, of course I can. I regret he formed a different opinion to me. I think he was wrong to do so. That’s my honest opinion. I was asked to go and express an opinion. It was an unambiguous one. It was clearly stated. No one could have been under any doubt where my sympathies lay in court. You refer to my side. You realise I was there fore a reason.
And yes I think the prosecution of these people was wrong from the start
And yes I think it was wrong they were found guilty
And do you know what? We’re allowed to say that in the UK. Our entire appeals system is based on the fact that people can and do say that judges get things wrong, persistently – and are proven right. I’m doing so even if the defendants aren’t appealing – and let’s be clear the five (not nine) found guilty of a trifling offence got the lightest possible sentences
So unprofessional? No, not at all. Unless being professional is being on the side of the prosecution on all occasions. And unless being professional is being on the side of HMRC in denying the scale of the tax gap and the crisis cuts will cause. Or it’s going to court when called as a witness and not telling what you think to be the truth the whole truth and noting but the truth
It’s not – so the only people being unprofessional on this issue are those suggesting I was not
You know perfectly well that the term “expert witness” has a special meaning in UK law, as someone who is appointed by the court (not called on by the defence or prosecution) to present an unbiased account.
At least admit you were being highly misleading and disingenous when you applied the term “expert witness” to yourself.
I was called by the defence as a witness given my expertise and gave an unbiased explanation, including a clear statement that HMRC disagreed with me and why and I then explained why I thought they were wrong
I was unbiased – as much as any expert is – and all are
But if you think I did not give the counter argument you are quite wrong
So respectfully I think your comment misplaced and even inappropriate