The FT notes this morning that:
The Conservatives, Liberal Democrats and Labour say they want to raise an extra £5bn, £6bn and £7.5bn a year respectively from tackling avoidance and evasion. They have laid out few details, although Labour has said its targets include private equity funds, hedge funds, quoted eurobonds, the “shares for rights” scheme, disguised self-employment and the use of dormant companies.
As they add:
These targets are highly ambitious. At first sight, they may appear credible given that measures taken by the coalition government to tackle aggressive tax planning, avoidance and evasion are forecast to raise to £7.6bn in additional revenues in 2015 and 2016. But these figures are flattered by a temporary surge in payments from users of tax avoidance schemes who are being forced to pay money upfront.
I hear echoes of Jolyon Maugham's warnings on this issue in that paragraph. The explanation for that is:
Official HMRC estimates suggest that avoidance costs just £3.1bn a year, in a sign that politicians would need to target practices that are currently seen as legitimate to raise significant sums.
I am afraid the FT is guilty of thinking too narrowly.
First, HMRC's estimate is just wrong. Tax avoidance is much higher than £3.1 billion, as I have argued. Even within the context of the HMRC report this figure is too low because it excludes disputes on legal interpretation, which appear to be tax avoidance issues by any other name. The HMRC estimate also excludes all of the tax abuse by companies like Google and Amazon, which are specifically not in their data as a matter of choice, which makes the figure both subjective, and unreliable. The true target the tax avoidance is, in my estimate, around £20 billion, although this would never be recoverable in full.
Second, the FT comment clearly misses the fact that some of Labour's targets are tax evasion. Disguised self-employment can fall into this category, and tackling the misuse of dormant companies, which is a policy based entirely upon my work that suggests that there are a substantial number of companies that claim to be dormant that are actually trading and which do, therefore, have tax liabilities that are not declared, also relates to tax evasion.
HMRC data suggests that tax evasion is much bigger than tax avoidance by value, and my own research says exactly the same thing, but with the scales being significantly higher. I think tax evasion could cost the UK more than £80 billion a year at present.
The trouble I have with political parties' estimates is not then how large they are, but is their lack of ambition. If only these parties would say that they would commit significant additional resources in terms of staffing, offices, and legislative support to the task of tackling both tax avoidance and tax evasion, with the latter being the more corrosive of the two problems now, then the yield on the investment would be substantial, and the payback much higher than any of them are willing to suggest at present.
Perhaps the most appropriate question to ask is why they are not willing to make that commitment and follow the example of the Greens and NHA Party who have been willing to do so.
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Scrapping the Eurobond exemption will raise little. They looked at scrapping it a while ago and didn’t because they realised it was pointless. Any parties estimates of tax raised by doing something like this a fundamentally flawed unfortunately.
I too just cannot fathom why the major parties are not making a commitment to really tackle the tax gap. In an age where we are seeing at best a sluggish economy, disposable incomes stagnate and “there is no alternative” to Osborne & Co’s austerity measures, surely it makes sense to make a concerted effort to collect as much of the taxes due as possible.
Whatever form our new government might take, if they were to get serious on tackling tax gap there must be investment in staff numbers at HMRC, a review of our more than 1,100 tax reliefs, proper monitoring of all tax reliefs to review their effectiveness in delivering the outcomes parliament intended and abolition of the “business friendly” approach currently undertaken by HMRC towards the tax affairs of large corporations.
In reality though I do not expect to see much if any of this happen from whoever forms the next government. What we really need is urgent reform of our political system.
My take on it is that the ‘£7.5 Billion’ claim is Labour running a flag up the pole to reassure the really large tax evaders that it’ll be business as usual.
Also: there might not be a pot of gold for politicians in tax avoidance, but there’s lots of good lunches and the occasional holiday on someone’s yacht.
I will be honest and say I think that is too cynical
I do not get this impression from those I discuss this issue with in Labour
“….my work that suggests that there are a substantial number of companies that claim to be dormant that are actually trading”.
The fact is that you don’t have the slightest shred of evidence that this is happening. It is all innuendo and supposition. Others have pointed out the absurdity of a tax evader drawing attention to themselves by forming a company.
I will challenge you here and now to produce any actual evidence and I know that you will talk vaguely of having produced ‘evidence’ elsewhere but you will not provide a link to it because you have no evidence becasue there is no evidence.
This is just part of your agenda of whipping up hysteria about tax evasion just so you can demand more jobs for the unions that give you money.
I have dealt with this issue so many times that I cannot be bothered to do so again: just read my work
And, for the record, I have no agreement with PCS or anyone else to demand more jobs. I do it because I believe that this is the right thing to do to create tax justice in the UK, including for all those honest small businesses whose interests are prejudiced by tax evading companies, about whose interests you clearly do not care, but I do.
As I’ve said time and again, there is no more pro-business campaign than that for tax justice. I always presume that those who oppose measures to tackle tax evasion must have some interest in its perpetuation because I cannot see another reason for doing so.
“I have dealt with this issue so many times that I cannot be bothered to do so again: just read my work”
I have read your work. It is all supposition and innuendo. I said you would respond by claiming you had already proved your case but would not link to it.
You did just that.
You cannot point towards facts because there are none. You cannot point towards evidence because there is none.
Wise people think otherwise
We shall have to agree to differ
And I note you ignored all the points I raised, which I think is clear evidence that you are not here to debate
Expect to be deleted in future
“And I note you ignored all the points I raised, which I think is clear evidence that you are not here to debate”
Fine, if you say it is a coincidence that the PCS give you money and you ask for more jobs at HMRC where the PCS operates I accept it as a coincidence.
And I do not oppose measures that tackle tax evasion. But I ask you for evidence that supports your claim that a ‘substantial number’ of dormant companies are being used for tax evasion. That is half of a debate because it requires you to supply that evidence as the other half of the debate.
You won’t
Because you can’t.
And why aren’t your supporters on here rushing to your defence to provide the links that prove your case?
They won’t either.
Because they can’t either.
Because there is no evidence that dormant comanies are being used in substantial numbers for tax evasion purposes.
Because they aren’t and an army of HMRC staff recruited to investigate dormant companies would be a waste of money.
McCarthy pursuaded many in 1950s America that there were reds under every bed and spies everywhere. That didn’t meant that there were.
PCS support me because of what I say, and not the other way round
And those links?
Yes, all to my work
I am the expert on this
Saying ‘you’re wrong’ without evidence does not make you an expert
Comments by people like Glyn make me very angry – in my former office in HMRC 10 years ago there were 30 VAT specialists investigating businesses locally, when I retired last year there were 12 and I was not replaced. Richard is not whipping up hysteria about tax evasion to create more jobs ( presumably useless jobs in Glyn’s opinion !), on average each of us identified twenty times the cost of employing us in additional revenue each year, so any additional staff employed would be highly valuable to the UK in their contribution to the Exchequer.
But you have to remember collecting tax is bad for the country in Glyn’s view
That’s where you and I differ from him
Thanks for your comment
I wonder if you could get together a narrative from a bunch of ex HMRC Staff
to show a wider audience the kind of point (and beyond) Old Codger makes. Those of us, in the Tax profession, in theory with differing objectives to HMRC, can also see the Lack of ambition and under resourcing so very clearly. The ideals of the Tax movement campaign are not the exclusive territory of Left Wing intelligentsia , Unions and various odds and sods, but others like myself who
have to deal day to day with the system.
Will see