I suggested ten tax loopholes to close yesterday.
If that's not enough for you there's plenty more tax reform to think about in a publication I wrote a couple of years ago for the Green New Deal group called The Great Tax Parachute, which summarised a number of suggestions I'd made on this issue over the ear or two preceding that. One or two will have changed now, but only in detail.
So try these suggestions from that publication about how to tackle tax avoidance, split into three groups. These are:
- Implementable straight away with no consultation required, not least because this will prevent tax avoidance taking place;
- Implementable after a reasonable consultation period to ensure that the policy is as effective as possible
- Implementable after further research is undertaken on the necessary mechanisms to create the tax.
Grouping the possible changes under the above headings results in the recommendations in the following table. In each case a link is provided to the course of further information on the proposal.
Implementable straight away with no consultation required
Recommendation | Approximate Impact | Source of further information |
50 per cent tax on all income over £100,000 | £2.3 billion | Compass, In Place of Cuts |
Taxing all capital gains at a taxpayers highest marginal income tax rate | £2 billion | Compass, In Place of Cuts |
Prevent anyone earning more than £100,000 a year claiming more than £5,000 a year in tax reliefs above their personal allowance | £14.9 billion | Compass, In Place of Cuts
TUC, A Socially Just Path to Economic Recovery Green New Deal Group, The Cuts Won't Work (variations on the theme available in each) |
End tax relief for all salaries and benefits provided in kind that results in an employee having total income from related employments exceeding ten times median UK earnings in a year (about £220,000 at present) | £2.4 billion | TUC et al — Taxing Banks |
Limit the time period for the carry forward of bank losses | £5 billion | TUC et al — Taxing Banks[vii] |
Reintroduce 10 per cent tax band to help those on lowest incomes | £11.5 billion of refunds | Compass, In Place of Cuts |
Uncap national insurance contributions and make them payable on investment income | £9.1 billion | Compass, In Place of Cuts |
Additional 10 per cent tax on bank profits | £2.2 billion | Tax Research LLP[viii] |
Limit ISA tax relief to funds invested in new Green projects alone | Neutral | Green New Deal Group, The Cuts Won't Work |
Total | £26.4 billion |
Implementable after a reasonable consultation period
Introduce a General Anti-Avoidance Provision | Up to £5 billion pa | Association of Accountancy and Business Affairs' Code of Conduct on Taxation |
Change the legislative basis for interpreting UK tax law so any action contrary to the spirit rather than the letter of tax legislation can be challenged in court | Included in above estimate | AABA Code of Conduct on Taxation |
Introduce a mandatory Code of Conduct on Taxation | Included in above estimate | AABA Code of Conduct on Taxation |
Abolish the UK's domicile rule | £3 billion | TUC, A Socially Just Path to Economic Recovery |
Introduce higher council tax bands | £1.7 billion | Compass, In place of Cuts |
Introduce a ‘Robin Hood Tax' on all foreign exchange dealing in sterling | £3.2 billion in the UK | Robin Hood tax campaign Budget Submission 2010 |
Reform rules on company residence so that companies cannot claim they've left the UK simply by holding their board meetings in another country | £1 billion at present, maybe more[ix] | TUC Pre-Budget report submission |
Enhance the rules on controlled foreign companies so that intellectual property rights cannot be easily transferred to tax havens without tax being due | £1 billion at present, maybe more | TUC Pre-Budget report submission |
Restrict the offset of interest against taxable income both for companies to reduce the incentive to overload companies with debt. | £1 billion at present, maybe more | TUC Pre-Budget report submission |
Restrict the tax relief available to those borrowing to finance buy to let properties to create a level playing field between new owner occupiers and new landlords | £2 billion, cautious estimate | Tax Research LLP[x] |
Demand that all tax havens in the world enter into Tax Information Exchange Agreements with the UK; | Up to £4 billion | Tax Research LLP, The direct tax cost of tax havens to the UK[xi] |
Promote the use of new mechanisms for Automatic Information Exchange between all tax jurisdictions except those where human rights abuses are commonplace. | Included in above estimate | Tax Research LLP |
Possible total , but to be treated with caution as some proposals may overlap | £21.9 billion |
Implementable after a period of further research
Reform the basis of tax residence in the UK so that a person with a UK passport is liable for tax on their world wide income unless they live in a state with a tax system broadly equivalent to the UK's. | Not yet clear, but maybe several billion a year | |
Radically reform the way in which small companies are taxed to both simplify current arrangements and prevent abuse. This would require the income of such companies to be treated as belonging to their shareholders, unless those shareholders are not resident in the UK, so preventing tax deferral by use of corporate structures.
|
£1.2 billion | Tax Research LLP, Small Company Taxation in the UK:A review in the aftermath of the ‘Arctic Systems' Ruling
Green New Deal Group, The Cuts Won't Work |
Introduce a ‘Robin Hood Tax' on all derivate, swap, bond and over the counter trading in the UK | £5bn, maybe much more | Robin Hood tax campaign, Budget Submission 2010 |
Reforming the tax relief for charities to stop abuse, increase the income of charities and to cut their administrative burden;
|
Neutral but significant admin savings
|
TUC, The Missing Billions |
A ‘bank debit tax' charging all payments from a UK bank account to tax at a tiny rate, and in the process replacing VAT, at last in part, with a more progressive tax based on a broader and therefore more progressive tax base | £4.2 billion | Compass, In place of Cuts |
Introduce country-by-country reporting for all multinational corporations based in the UK, and demand it be introduced internationally by the International Accounting Standards Board and European Union so that multinational corporations will be required to account publicly for where they declare their profits and where they pay taxes, including full disclosure with regard to tax havens and secrecy jurisdictions. | Not yet known | Green New Deal Group, The Cuts Won't Work |
Introduce an empty property tax | £5 billion | TUC, A Socially Just Path to Economic Recovery |
[vii] The estimate is made here. UK companies reduced their total deferred tax liabilities in 2008 by £17 billion according to international accountants Deloitte. Not all of this would relate to banks and some losses will have been sued against profits in 2009, but the estimate is considered reasonable in the light of losses sustained by Lloyds, RBS, Northern Rock and others that were covered by tax bail outs and do not need to be relieved again.
[ix] These estimates are provisional
[x] Currently unpublished research
[xi] Based on total estimated loss of £8.5 billion less estimate for that part attributable to non-domiciled people that cannot be double counted
The Green New Deal Group are: Larry Elliott, Colin Hines, Tony Juniper, Jeremy Leggett, Caroline Lucas, Richard Murphy, Ann Pettifor, Charles Secrett and Andrew Simms
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
While I think that it may be clear that the coalition or any future Tory administration is unlikely to adopt your proposals, which are generally ‘fair and reasonable’, it’s not clear that any future Labour administration would do so. It becomes increasingly difficult to see that any political party is willing to take anything other than a short term economic view, which is designed to ‘preserve the party in power’.
PS – Having been ‘self employed’ and effectively forced out by IR35, I think that your paper on the Arctic Judgement presents a sensible solution.
I share you concern
And incidentally, the Treasury much liked my Arctic Systems paper
Politics forced it out
Just increasing the Council Tax bands does not address the issue of the distortionary nature of all real estate taxes. The imbalance between residential (lightly taxed) and business (heavily taxed) rates leads to business failures and unaffordable homes. The exclusion of agricultural land from taxation ensures that the CAP subsidy simply increases the value of farms which disadvantages tenant farmers and that the young and unprivileged never get a chance to farm their own land. The exclusion of country estates from taxation maintains the vast inequality of wealth and opportunity. The exclusion of brownfield sites from taxation leads to urban sprawl, price rises and unsightly neighbourhoods. Stamp Duty Land Tax hobbles the whole market.
The Green Party supports land value taxation.
Limiting tax relief to £5k for incomes over 100k would fall very unevently. What about single-handed doctor etc, whose whole business is funded from his/her gross income?
A doctor should not pay tax?
Why not?
And the funding does not come from the doctor – I know, I’m married to one
OK, maybe a doctor was a bad example. Try a self-employed plumber with a van and a plumber’s mate. And of course they should pay tax, but not on money that is a legitimate expense of doing business. Are you going to forces these people to incorporate?
Why on earth do you think I want to tax legitimate business expenses?
Ah, OK, I’ve misunderstood what you meant by “Prevent anyone earning more than £100,000 a year claiming more than £5,000 a year in tax reliefs above their personal allowance”
I was referring to pension reliefs etc
I largely agree with these proposals, but I have a couple of concerns.
First of all, and I can only speak from a Scottish perspective here, a reformed council tax with higher bands would raise next to nothing, so it may not be of much use here. The problem with the council tax is it can hit poor people pretty hard and I would like to see it replaced altogether. Here in Scotland that has been a live issue, but the SNP, previously champions of it, have been dragging their feet since they got a majority Government.
My second concern is with the “bank debit tax”. While I support it in of itself, how practical would it be as even a partial replacement for VAT. Could it raise anything like enough revenue?
Iain
First I see no reason why Scotland may not have a second propert tax
The bank debit tax would raise much more than VAT if desired….and it’s progressive
Richard
Richard
Wouldn’t a bank debit tax simply encourage people to draw out large sums of cash at a time and pay bills in cash? Surely that would merely facilitate even greater levels of tax evasion by growing the “cash economy”?
More thn it is?
The answer is to eliminate high value notes in that case