I had this column on the Independent website yesterday:
It was just chance that I decided to publish my new report on the size of the UK's shadow economy and the resulting loss to the UK government from tax evasion on the same day that Credit Suisse pleaded guilty to a sample charge of helping its clients evade tax in the USA
Chance it may have been, but it was poignant too, for a very good reason. For a long time offshore banks have denied any involvement in tax evasion, or the scale of the abuse . Very slowly they are now coming to terms with the possibility . That contrasts their position with that of HM Revenue & Customs when it comes to the UK shadow economy and the tax gap.
HMRC remain in complete denial that there is an issue of the scale I have discovered, and on which I report today.
This difference of opinion between HMRC and me matters. First it matters because, almost absurdly, the only alternative views on the tax gap in the UK appear to come from HM Revenue & Customs and myself, as too many debates in parliament have shown. UK universities have, for example, almost entirely backed away from any research of any sort into this vital issue.
Second, the difference between my estimate of more than £40 billion and HMRC's of £10 billion matters because this is more than the sum that the government's austerity measures are meant to deliver. If the government has the tax gap wrong then austerity is not needed: closing the tax gap is, instead.
Third, this matters because this is an issue of social and economic justice. It's about social justice because if, as I suggest, both HM Revenue & Customs and Companies House, who are tasked with regulating the UK's companies but who very clearly do not, turn a blind eye to their obligations then lawlessness is being permitted in the UK economy. Failing to collect more than 270,000 tax returns from companies (as HMRC do) and 340,000 sets of accounts (as Companies House do) is very obvious evidence of that failure.
But this is not just about a break down in law and order and the resulting required transparency and accountability of the corporate sector, important as that is (as Credit Suisse prove, in another way), it is also a telling indictment of the government's lack of understanding of the business sector. If, through its neglect, the government forces all the UK's honest smaller businesses to compete with businesses that HMRC and Companies House are failing to regulate then it inevitably follows that the government are giving an unfair economic advantage to the cheats who do not pay their tax.
No wonder as a result that the High Street is being decimated, bar the occasional fly-by-night pop up shop. And no wonder young people cannot find the jobs and apprenticeships they need with local employers when those honest enough to invest in jobs for those young people are likely to be competing against rogue traders who do not charge VAT on their sales and pays cash in hand wages.
Is this the sort of economy the government wants? That's the challenge that my tax gap data presents to them. It says this government is making the wrong choice on tax, on justice and the economy. Getting heavy on tax evasion and collection is, I suggest, the way to deliver economic prosperity to the UK. It's time our government — and most of all HMRC — said so, but there's no sign they're going to do so any time soon and we should all regret that fact.
PS I did not write the ghastly headline the Independent used
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Fine Richard, now please explain what these ‘unfair economic advantages’ are, because I think you’ve tied yourself up in knots here.
P.S.shall we conduct this discussion on the Indie’s website; I don’t trust the moderator on this?
I have complete faith in the moderator here and will not be bothering wasting my time explaining further why letting some people have a tax advantage by not paying tax is anything but an unfair economic advantage
If you can’t see that the debate is really not worthwile
¨And no wonder young people cannot find the jobs and apprenticeships they need with local employers when those honest enough to invest in jobs for those young people are likely to be competing against rogue traders who do not charge VAT on their sales and pays cash in hand wages¨
For decades now UK industry has relied upon others, usually in the same industry (if not country) to train its future employees. Which leads to the problems now being faced, where an employer only partially trains employees (if that) for fear they will depart to another employer if fully trained.
Not to worry!
I have just been wandering through a book review:
http://www.lrb.co.uk/v36/n10/perry-anderson/the-italian-disaster
which is pretty scathing about the state of politics. Apparently, a sesspit is clean in comparison!
¨But corruption is not just a function of the decline of the political order. It is also, of course, a symptom of the economic regime that has taken hold of Europe since the 1980s. In a neoliberal universe, where markets are the gauge of value, money becomes, more straightforwardly than ever before, the measure of all things¨
Not much chance of things improving if everyone is on the same gravy-train?
We aren’t all on it
I’ll repeat, I don’t think you can tell us and I think you’re wriggling.
I’ll ask again, more specifically: how does not paying CT give a business an unfair economic advantage?
If you really can’t work that out for yourself you won’t understand any answer I might provide
OK, here’s what I think:
The company that avoids CT has more funds avaialable to reinvest, to pay its staff more or to lower prices. All providing competitive advantage for it over the honest company. It can also pay out higher dividends to investors, an economic advantage.
You, however, can’t agree with that, because say the incidence of CT is only on the investors. So by your reasoning there can be no competitive advantage for the tax avoiding company. Yet you want it both ways don’t you, so you simmply don’t respond.
How very odd when it is well known I usually argue for incidence being in companies
In the case of evasion though it can’t be as the money is picketed by an owner
And on the way staff are usually exploited by cash wages and customers by fly by night and unsafe services
But wish as you will. And your logic will apply in some cases, undoubtedly
Er, if my logic applies in some cases then the incidence is on labour or the consumer; not uniquely capital, which is actually what you argue.
“Incidence is in companies” has no meaning and you can’t give it one.
Incidence in this case is undoubtedly on the owner
As I always ultimately argue
With the company acting as their agent in a great many cases
Again, “the company acting as their agent” can mean many things, or none!
If the incidence of CT is on the owner (and only the owner) then there is no competitive advantage offered to an evader – or an avoider. So you are unable to link it, as you have tried here, to high street closures, to a failure to invest in training young people. If lower wages or lack of investment opportunities comes direct form trading at a tax disadvantage then some of theincidence is on employees.
In short, you might try but are not entitled to write ‘unfair advantage’ in one post and then ‘no incidence on employees’ in another as if nobody ever reads more than one of your posts.
I have to admit your tediousness wears me and it must other readers
Your inability to hold more than one idea in your mind at a time is quite remarkable
You will be blocked for time wasting in future
Thanks for the “In the Shade” report.
It was really helpful.