I have the following on Comment is Free this morning:
The Tax Justice Network has published new research I have undertaken on its behalf. Using data sourced from the World Bank, CIA World Factbook, the Heritage Foundation and World Health Organisation this research — for the first time ever as far as we know — estimates tax evasion for 145 countries in the world covering 98% of world GDP between them.
The result is astonishing: between them these countries lose $3.1 trillion to illegal tax evasion. That is more than 5% of their GDP. To put this in context, that's also 54.9% of those same countries total spending on healthcare.
The research will, however, be controversial. For example, the findings show that tax evaded in the UK might be £69.9bn a year. This is extraordinarily close, despite very different bases of calculation, to my 2010 estimate for the Public and Commercial Services Union of £70bn, which HM Revenue & Customs and the government have always challenged. They say the figure is only £35bn a year for the UK, including tax avoidance, which I additionally estimate at £25bn.
It is important to highlight such differences of opinion. Across the world governments have paid too little attention to tax evasion, claiming the issue is smaller than it really is. They have done so because like the UK they only look at errors in the tax returns they receive, ignoring the fact that serious tax evaders are outside the system.
That negligence is now costing us dearly. For example, Italy is losing €183bn a year to tax evasion in my estimate. Its total external debt is €1.9tn. If it had only suffered the UK's rate of evasion in the last decade then its deficit would be less than half that sum now. The same would also be true for Greece, and only slight less so for Spain. In other words, if tax evasion had been taken seriously and been tackled in these countries we would not have a crisis in the eurozone today.
Something similar could be said for the UK. The US has an evasion rateabout two thirds that of the UK. If we had reduced our tax evasion rate to US levels in the last decade we might owe £200bn less in debt now. Alternatively, cuts of more than £20bn a year could be avoided in the UK economy now with our debt still being tackled at the current rate. That could prevent most of the current stress in the NHS; sixth formers would still have maintenance allowances and we might not be facing a national strike next week.
Most importantly though I believe that this reduction in tax evasion in the UK and elsewhere is possible. As the Tax Justice Network's new Tackle Tax Havens website shows, tax havens help serious tax evaders hide their crime. We could stop that by demanding that tax havens be transparent about the individuals, companies, trusts that use these places, starting with the UK's own tax havens and then moving on from there. The world's shadiest places and their users would then come under the scrutiny that's needed to make sure tax is paid.
We could change things at home too. Despite government claims that they are tackling this issue they're still planning to cut 12,000 jobs at HM Revenue & Customs over the next few years; job losses that will simply deny our tax authority the people needed to chase tax due by cheats in this country. That makes no sense. Twenty thousand new staff at HMRC could transform government finances and with it the state of our national economy. Tackling tax evasion is in the national interest and in the world's interest. Now we know just how much tax is evaded a new strategy for tackling the world's deficits is available.
We could stop the cuts: we can collect tax due instead. That way we all win.
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Can I just check whether the data presented in your research refers only to tax that government could legally collect and that even larger sums are lost simply because legal treaties with complicit jurisdictions create a fiction that earnings that would otherwise have been taxable have been earned in places like Delaware where no tax is due? To put it another way, do your evasion figures include sort-of-legal but immoral tax haven dodges, or do they simply reflect bare-faced cheating?
In principle this should be all the evasion – but it’s entirely possible that some going to tax havens is omitted entirely since it falls outside the jurisdiction completely
Thanks for that. I can conclude, then, that tax evasion includes a lot of avoidance that is based on the simple fact that a would-be tax payer is doing the equivalent of drug-taking in sport – simply getting away with cheating in the happy knowledge that no one can detect it in the urine samples.
This article is a complete joke. You are comparing two different reports – one for the PCSU, the other for TJN – which were both written by yourself. You then claim that it is “extraordinary” that your estimate of tax evasion for one report should be so close to your estimate in the other report. And then you say that it is important to “highlight these differences of opinion” as if they were by completely different authors! What is “extraordinary” is why two estimates of tax avoidance 12 months apart by the same person should be so close given the fact that they were based on “very different bases of calculation”.
Are you alright, Richard? Or have you completely lost the plot?
The methodologies used were quite different
In that case the coincidence is just that – coincidence, but also corroborating
I’m fine, and absolutely correct in my observation
What bemuses me is why pedants like you ignore the issue and play the man
Is it you want to draw attention away from the crime of tax evasion?
Do you support it?
You have assumed that all economic activity in the shadow economy would still exist if it was taxed in full.
Do you really believe that?
I have not assumed that
I always suggest we could only ever get part of this back
As ever you are arguing with your own straw man
Is it that you’re on the side of criminals?
It appears that if Italy had collected all the tax that had been salted away in tax havens, it would have easily been able to cope with its present debt crisis.
It’s like I said a few times before. It’s time for countries to take back democratic power from the likes of the ECB and the IMF.
And for the ECB to actually act like a central bank.
Is this real?
You write an article in the Guardian about a research report that you claim is ‘astonishing’ – although you were the author of that research report.
Then you claim this will be controversial but is similar to the results of another piece of research on tax evasion the UK – which you are also the author of.
Does it not concern you that your figure for Italy is €183billion? Does it not trigger you to perhaps think – ‘maybe there is a flaw in my calculation – perhaps it is not quite as simple as I think?’.
Do you honestly think there is €183billion waiting to be collected and it would not have a knock on effect elsewhere?
The conclusions of this would be similar to a scientist calculating that by applying x% extra thrust to a jet engine, speed would go up y% while completely ignoring the effects of wind resistance
Yes this is real
And no – as I said in the Guardian, and always say, I never assume we can get all of this
But I do think we can get a chunk of it
On your logic we wouldn’t tackle crime as there would always be some left unsolved
What does that say about your logic?
And doesn’t it more than justify mine?
If the tax had been collected, would spending have fallen? Would less have been invested into the economy?
Also, if that tax had been collected, would the governments have restricted their spending to revenue or still created deficits?
I’m not for one second saying tax evasion shouldn’t be investigated to the fullest extent, but the economic troubles are a cultural problem.
And respectfully, I do not agree
All you are doing is condoning crime by offering excuses for it
So all the money that has been wasted on NHS and Passport Office IT failures etc etc …billions! Why was that wasted?
Because the government over-collected tax?
Anyway, I can’t believe how you read Nick Yule’s post as condoning criminality.
You simply cannot pin the cuts on tax evasion, government has also has a case of wasting money and not being prudent…..or would you like to disagree?
That money was wasted because the private sector – that undertook all these contracts – said it could supply workable systems and did not do so
If I buy a computer and it does not work is that my fault? Or the suppliers
Ditto government IT contracts
These are private sector failures tantamount to fraud
Somehow your unsubstantietd allegation of the fault lying with the private sector doesn’t surprise me one little bit.
However, assuming you are correct, it does show just how reckless the state is with our tax reciepts.
Why did the state pay for work that was not fit for purpopse?
Why have they not sought to recover any monies paid where the contractor was in breach of contract?
If the private sector has fraudulently misrepresented its work, why has no legal action been instituted.
Simply put, why has the public sector not taken any action to recover our money?
I suspect the answer is that they are simply reckless with our money, couldn’t give a damn. The state wasted our money. Or they were complicit in feeding the fat-cat?
Remember how John Prescott blamed the civil service over the 500 million wasted on the fire services IT project.
The misrepresentation was so large it would wipe tg contractors out
Does the state want to do that?
That is the complete explanation
It is called ‘too big to fail, even when you have’
Accenture too bug to fail?
Lets see…incorporated in Bermuda, HQ to to Ireland. Even I am shedding tears for them
Walked off the NHS job in 2007, allowed to keep the 110mill it had already been paid, paid a penalty of 63 mill when the contract stipulated a penalty of 1 billion.
Revenue for the financial year under consideration $25 billion – not sure this penalty would have put Accenture under, do you?
Who forgave the penalty: A civil servant earning 100K more than the Prime Minister (280K).
Maybe Vodafone was forgiven its tax bill for the same reason too. Goldman’s as well, they have had a rough time since 2008.
If the tax had been collected, would spending have fallen?
Who can tell? All you can say is that more revenue would have been available. Levels of spending are a matter of ideological taste.
Would less have been invested into the economy?
Ditto. Investment and its forms are a matter of ideological taste.
Also, if that tax had been collected, would the governments have restricted their spending to revenue or still created deficits?
If you believe a word of what the conservative government says it would be the former. Deficits are a tool that sovreign governments in control of their own currency can use to execute their aims. That is exactly what they are doing. Their aims seem to be to recreate the inter world war economy with the addition, if the OBR is correct, of a huge burden of personal debt.
Its a strange ambition, I hope you would agree.
I’m not for one second saying tax evasion shouldn’t be investigated to the fullest extent, but the economic troubles are a cultural problem.
Then you are very much at odds with the conservative government. Using the deficit bogey man to justify the dismantling of all forms of social security while actively diminishing the ability to collect revenue strikes me as clearly mendacious.
You are correct though, it is a problem of the miserable, antibiotic culture of neo liberalism, which amounts to little more than a few highly partial, and hence all the more keenly held, prejudices.
When we talk about tax abuse, it almost seems as if it is so clever to come up with these scams. The fact is that any business creates wealth from its customers and fair market place.
The income generated from customers should be taxed in the customers country since it is the customer who helped create that wealth (this goes for Google,Amazon, Vodafone)
If we do not have a fair playing field the rule of law will be abandoned especially now that we have a recessionary economy.
Tax is a way of putting back in to our customers society for the well being of that society. In India there is $15,000 Billion stollen and in Tax Havens. Money which can be reivested for health, education and investment in the customers country.
[…] http://www.taxresearch.org.uk/Blog/2011/11/25/collect-the-evaded-tax-avoid-the-cuts/ … the findings show that tax evaded in the UK might be £69.9bn a year…. […]
There is even evasion of council tax…
Only nine of the 62 apartments sold in One Hyde Park — the world’s most expensive residential block — have been registered for council tax.
The ownership of the Knightsbridge apartments, which range in price from £3.6m for a one-bedroom flat to £136m for a penthouse, is now under investigation by Westminster city council, which is determined to pursue the monies owed by the secretive owners of the apartments.
Council records show that only four owners are paying the full council tax of £755.60 a year plus £619.64 to the Greater London Authority, while five are paying the 50% discounted council tax owed on a second home.
http://www.guardian.co.uk/uk/2011/nov/26/one-hyde-park-council-tax
Your Tax Abuse report makes for very interesting reading. I’ve used it (mentioning my source) to write a post on whether Italians can justify evading taxes and included a simple per capita comparison of certain nations including Denmark which I had been led to believe was one of the more virtuous countries. However, with what looks to be a level of tax abuse costing Denmark €27,600 a year, I’m not so sure!
A €153 billion, the level of tax abuse appears to be very high in Denmark. Perhaps you could check the figures?
Many thanks,
Alex Roe
The Danish result is, I think, right
What it says is that quite a large shadow economy – 17.7%, when combined with a high end tax rate, 49%, produces a lot of tax lost
My impression of the Danish countries is that there are big shadow economies
You could of course argue that is the result of their tax rates, and so it might be
You could also argue it says that at the margins, and this is a margin, this amount of shadow activity would not arise if taxed. That’s possible, of course. The figures are indicative and can never suggest the full amount recoverable
But since they also almost certainly exclude some tax haven losses they may overall still be too low
What is clear is that denmark has a real issue to address – but I don’t pretend for a minute it can collect that much tax
Richard,
Your study on evaded taxes tends to indicate that Switzerland is the best-run country in the world !
It has the lowest percentage of shadow economy (the lower the figure, the higher the confidence of the people in the State where they live, and in the way the government spends the taxpayers’ money, hence reduced incitations to get involved in shadow activities).
This confidence is attested by the strength of the Swiss franc, sound public finances, or a low unemployment
Since all your comments on Switzerland are critical (to say the least) of that country and its people, isn’t your study a strong indication that that small federal European country (among the top 20 global economies, but not a member of the G20) has many features (including in its tax system) that should be a source of interest – rather than cheap sarcasm – from so-called pundits like you ?
Best
Bernard
The Swiss don’t need to evade their own taxes
They steal everyone else’s
It’s state set up to facilitate tax fraud
Is that your idea of what is desirable?