Labour has broadened its stated tax policy tonight. The previous seven commitments have been broadened to ten which are now:
- Abolish the non-dom rules so that wealthy people are not able to use loopholes to avoid paying tax like the rest of us, while introducing a temporary residence rule for those genuinely in the UK for a short period of time, such as university students.
- Re-write the rules which allow private equity managers to get away with paying less tax than ordinary working people even when they have not been investing their own money
- Close loopholes used by hedge funds to avoid stamp duty
- Force the UK's Overseas Territories and Crown Dependencies to produce publicly available registries of beneficial ownership
- Increase penalties for tax avoidance including new penalties for those who are caught by the General Anti-Abuse Rule
- Close loopholes like the Eurobonds loophole which allow some large companies to move profits out of the UK and avoid Corporation Tax
- Scrap the “Shares for Rights” scheme, which the OBR has warned could enable avoidance and cost £1bn
- Tackle disguised self-employment by introducing strict deeming criteria
- Tackle the use of dormant companies to avoid tax by requiring them to report more frequently
- Make country-by-country reporting information publicly available
I can't by any means claim involvement with all these commitments: I can in those highlighted in italics, and am pleased to be associated with them.
The result is that Labour's got a £7.5bn target for cutting tax avoidance and evasion, which is more ambitious than that of other parties. As they note tonight:
Under the last Labour government the tax gap was falling by £1.5bn a year on average between 2005-06 and 2009-10. But under the Tories it has been increasing by an average of £1bn a year.
The next Labour government will set a target to not only get back to avoidance and evasion falling at £1.5bn a year, but reverse the increases under the Tories as well.
That will mean cutting tax avoidance and evasion by £7.5bn a year — with the ambitious goal of doing so by the middle of the next Parliament.
I remain of the view that more is possible if resources are allocated - and still hope for that commitment and a commitment to an Office for Tax Responsibility. But these announcements, also made tonight, are welcome steps in the right direction:
Ed Balls [has said he] will give the Treasury and HMRC warning that on the first day of a Labour government there must be:
- A draft Finance Bill which is an Anti-Tax Avoidance Bill and delivers the legislation needed for the measures set out in Labour's ten point plan to tackle tax avoidance and evasion;
- A report from HMRC on all current measures and processes for tackling tax avoidance and evasion, so that Labour's review of culture and practices at HMRC can make an immediate start.
He will also ask the Bank of England to focus on risks from the informal economy, including avoidance, evasion and the tax gap, in delivering its financial stability objective.
Labour's immediate review of culture and practices at HMRC will help deliver this reduction of at least £7.5 billion a year in tax avoidance and evasion in the next Parliament — with the ambitious goal of doing so by the middle of the next Parliament. This will reverse increases in the tax gap under the Tories and get it back on a downwards trajectory.
Both the Chancellor and Chief Executive of HMRC will also have to present an annual report to Parliament, and give evidence to the Treasury Select Committee, on the government's progress in tackling tax avoidance and evasion.
This focus on the tax gap is, of course, what I want the Office for Tax Responsibility to deliver and I believe that such a body would help Parliament hold HMRC to account, but the sentiments Labour are expressing are clearly consistent with my views on tackling the tax gap, all of which is good news. And I will be looking for delivery.
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very good news I agree, all we need now is a clear out at the top of hmrc and the extra 10,000 tax inspectors you have called for
Indeed
Shame that commitment has not been made…..
One would assume Labour would have no problem placing the draft Anti-Tax Avoidance bill in the public domain for scrutiny.
Note their wording, which is an accurate description of what happens
I have noted the wording which is at best vague.
“Ed Balls [has said he] will give the Treasury and HMRC warning that on the first day of a Labour government there must be: A draft Finance Bill which is an Anti-Tax Avoidance Bill and delivers the legislation needed for the measures set out in Labour’s ten point plan to tackle tax avoidance and evasion”
Day one is just around the corner- let’s see the draft legislation to see if the Labour Party are actually prepared to put words I to deeds.
This is after all the party who rejected outright a GAAR in 1999.
I wish someone would tackle the loopholes to stop tax evasion or avoidance in the City of London, that’s the most important fraud in the world.
The people use other offshores to hide their money and when it comes back to the City is become whiter than white and impossible to trace, that has to be the priority to stop fraud in GB.
Richard
FWIW
1 – An equality measure but the tax/economic outcome just cannot be predicted.
2 – I doubt they are paying ‘less tax’ but maybe at a lower rate. But if there are unforeseen outcomes of the current rules they should be changed but that should apply to ALL tax legislation.
3 – See 2 above.
4 – To be applauded for transparency but no guarantee of any extra tax. An expectation of extra tax implies an expectation of evasion. But there is no evidence of this.
5 – We can already fine tax avoiders (see Litman & Newall v CIR) so not sure we need this.
6 – See 2 above.
7 – Having been on the edge of just such a scheme I agree that it is being abused. Can supply details if you are curious.
8 – Who are they after here? The construction industry? Professional LLPs? Why should a member of an LLP pay tax at a lower rate on economic activity than an employee as they do if you believe employers’ NI is a tax.
9 – There is not a shred of evidence that dormant companies are being used to evade tax. A bonkers waste of government money.
10 – Again great for transparency but no suggestion more tax will be raised.
Some good ideas but generally seems to be based on the assumptions that (i) everyone’s evading tax and (ii) all wee need to do is close a few loopholes and tax will come rolling in.
A bit populist and naïve.
Anyone would think an election was on the way!
KRs
Tim
Oh dear
You clearly have not bothered to read the evidence, have you?
Richard
Perhaps you could expand on your rather trite response?
Where do you think my analysis is wrong and why?
KRs
Tim
No, because you are a time waster and I have a life
Next time I will delete instead
I’m still hoping that behind the scene Labour is looking at implementing LVT – we’ve given them a plan which would be kind to homeowners but put a stop to the landlords’ and speculators’ gravy train. It is not something that you would put in a manifesto with the sort of gutter press we have here. The Mansion Tax is just a quick fix according to Balls.
There is no doubt that this is a positive start to deal with tax justice but Labour will have to invest to save – that is to say it must increase staffing at the HMRC in my view.
My only worry here (other than that this just might be guff and Labour will be just as relaxed about how people got rich in the first place like their were previously) is that if they go into coalition with say the Lib Dems who no doubt may want to obstruct some of this to be seen as being effective.
That’s a risk, of course
I would rather hope there is no coalition with the LibDems
Richard,
As you note, these ten points are vital to the debate on societal obligations.
A question, do you feel these points will, rightfully, move the issue of ‘taxation’ from that of an economic debate, to it’s rightful place as a societal debate?
They certainly help
Not all that’s needed – but they make the vital point that tax is not just about money
And that is essential
Richard,
What should we look for, in terms of the vital transfer of this issue from economic to societal? The point of victory and no turning back, if you will. I would argue that the language of the debate is well on the way to victory, this is crucial.
The sign is when we get a tax policy that costs money but is the right thing to do for society
That will be when we have crossed the Rubicon
“And I will be looking for delivery”. Oh, RM how so few words carry such meaning.
One can legislate until the cows come home but it does not follow that successful implementation will follow. One can even pump extra resources into HMRC and it will not work. One troubling aspect which is a major log jam is the power of
tax barristers and legal/quasi legal firms, and maybe the legal system itself.
Parliament is dominated by lawyers, and like Turkeys are not going to vote for Christmas in curtailing the legal profession.
One last note, a direct result of the above, is that under a Labour Government the Tax Profession will get oodles of work, so you may get an award!
I get the impression that the Labour team are testing the water on Tax avoidance/evasion and will be emboldened by the popularity of the announcements, although I suspect they are treading a fine line between getting the message out and being pilloried by the media.
It must be gratifying though to see so much of your work being absorbed into mainstream policy.
Well done and thank you.
I am waiting for delivery before celebrating…
And we should trust Labour to fulfill these promises because?
Maybe if they said, “In the first year we will…”
And they failed to include splitting the Investment Banks from the High Street banks which is fundamental to stopping these corporations using our money to invest in War & Fraud schemes.
Understood Richard, although unusually, I am optimistic for reasons I can’t quite explain… More of a feeling (possibly inspired by the late, lamented Tony Benn’s endorsement of Ed Miliband)