Tax avoidance measures announced by the Government since April 2008 have raised nearly £1 billion, but far more could be done with tougher measures and more staff at HM Revenue and Customs (HMRC), a TUC pamphlet says today .
The TUC Touchstone Extra pamphlet Stemming the Flood? - written by TUC tax advisor Richard Murphy - calculates that anti-avoidance measures announced in the 2008 Budget, 2008 Pre-Budget Report (PBR) and 2009 Budget have so far raised around £990 million in extra tax revenues.
The pamphlet also argues that G20 proposals to crack down on tax havens and the Code of Practice on the Taxation of Banks - a draft of which was published in June 2009 - may both lead to a more effective tax regime if properly implemented.
But there have also been disappointments and missed opportunities, most importantly the failure to tackle income shifting - where higher rate tax-payers shift their income to basic rate or non-tax payers, says the TUC. The Government has backed away from addressing this despite initiating a consultation exercise, the pamphlet says.
The TUC believes much more could be done to raise money through a fairer tax system that makes it harder for people to avoid or evade paying the proper amount of tax. A previous TUC report - The Missing Billions - calculated that the UK has a tax avoidance gap of £25 billion.
Stemming the Flood? sets out a series of proposals that the Chancellor could include in next week's PBR to close the tax avoidance gap, including:
- a minimum rate of tax to be paid on the income of those earning more than £100,000 a year to ensure that they do not unduly benefit from tax reliefs and allowances;
- abolishing the UK's domicile rule as a first step towards simplifying overly complex rules on personal tax residence;
- introducing a new law called a 'general anti-avoidance principle' that treats all tax avoidance as unacceptable and therefore open to challenge;
- tackling income shifting by reforming the way in which small companies are taxed to simplify current arrangements and prevent abuse; and,
- stopping the current round of HMRC staff cuts.
TUC General Secretary Brendan Barber said: 'The Government has made a good start in cracking down on tax avoidance and HMRC has showed real determination in chasing the tax dodgers.
'But there is still huge potential to raise a significant amount of money from a fairer tax system that asks the super-rich to make a proper contribution.
'The best way to tackle the deficit is to get the economy growing again, but there will still be a need to take further action.
'Too many say the next Government will have to make big cuts in vital services or make ordinary people pay more tax. But there is an alternative and that is to ask those who did so well out of the boom to start paying a fairer share of tax.'
Other tax avoidance proposals in Stemming the Flood? include:
- creating a new statutory basis for determining when a person is tax resident in the UK as is currently being considered by the Treasury;
- reform of the rules on company residence so that the artificial relocation of a company's place of management and control in order to escape the UK tax net is harder to achieve;
- tackling abuse arising from companies transferring the ownership of intellectual property into tax havens;
- charging all capital gains on assets held for less than a year to income tax and increasing the rate of tax on remaining gains to reduce the incentive to shift income so that it is treated as if a gain;
- demanding that all tax havens in the world enter into Tax Information Exchange Agreements with the UK;
- promoting the use of new mechanisms for Automatic Information Exchange between all tax jurisdictions;
- increasing co-operation on taxation and accounting internationally to ensure that companies are held to account for where and how they operate and are required to act as good corporate citizens, including in the payment of their dues to society as a whole and in each location in which they operate;
- making the Bank Code of Conduct legally enforceable;
- introducing a Code of Conduct for all taxpayers, tax advisers and the Government itself, with increased penalties for non-compliance; and,
- applying the 'name and shame' provisions now being used to target tax evaders and large companies to the bankers, lawyers and accountants who might have assisted those so named.
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I think that your point about a minimum rate of tax is very important. I was at a seminar the other day on the subject of tax shelters. The speaker’s first point was that paying tax is optional and he is quite right. It is, and nothing was proposed that involved anything even close to the edge legally or tax havens or any secrecy.
However the fact is that it is repugnant that people believe they should make no financial contribution to the society in which they live.
“applying the ‘name and shame’…..accountants who might have assisted those so named. ”
Might have assisted? that could end up in a whole lot of libel actions. Surely they should apply the provisions to those that actually assisted.
and until tax avoidance is illegal it is a bit weak. “This accountant might have assisted X in doing something completely legal”
Creg
There is always an appeal procedure
And as a matter of fact avoidance is now unacceptable
It will take little effort to make assisting it illegal even if it remains legal
Thanks for giving me that train of thought
Richard
Richard,
It will take little effort to make assisting it illegal even if it remains legal
If tax avoidance (a perfectly legal, moral and ethical thing) remains a legal activity, how can the assistne thereof be made illegal?
Georges
It is not illegal per se to be a prostitute
It is to be a pimp
Think about it
Richard,
In 2008 non-financial corporations had £1.86 trillion of debt, excluding equity liabilities. The debt of financial corporations was £5.53 trillion, excluding deposit liabilities and equity liabilities. I am interested to find out how much tax shield (the amount of tax relief) was provided by HMRC to both groups in respect of the interest on their debts. Can you help?
Many thanks
David
We already have this system where assisting is on the verge of legality
A friend of mine is a surgeon setting up a his own practice hoping to do routine procedures efficiently and quickly, he is a good surgeon but ignorant of finance, his magic circle lawyer advised him to use a certain structure for his company, he then sat down with his big 4 accounting firm and told them how he was going to set up, the accountant said you cant do it that way, now I know that thats what you are thinking I am under obligation to report you to the inland revenue unless you use my particular structure, he came away with the feeling he was being overcharged then threatened rather than advised , I think we are going to see a rise in illicit back street red light accounting services …
@David Marks
Sorry
Without research which I have not got time to do, the short answer is no
Richard
Catsick
Your mate must have been up to some very funny business, that’s all I can think. There would be no difficulty in setting up a new business using a limited company, unless what your mate wanted was some byzantine structure to avoid paying tax on his profits, in which case he is perhaps not quite such an innocent as you suggest.
If need be, I can direct you to some back street redlight accounting firms. they’re called “The Big Four”!