Beating the tax gap

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I am on my way to Brussels this morning to speak at an EU Parliament event organised by the Socialist and Democrats Group of MEPs (of which Labour MEPs are members) on ‘Who stole our future?’. It seems that the tour has resumed despite recent events in my life. That is because I feel that it’s appropriate to do so. I will be talking about the tax gap in the context of the reshaping of society that we need. And if we are to have a future that includes the sense of public duty that my father undoubtedly embraced throughout his life then beating the tax gap is a key issue.

Several years ago I worked with the late Michael Meacher MP on this issue. Michael proposed legislation I had written to address the tax gap in the Commons as a private members bill. I well remember Jacob Rees-Mogg opposing it because he said, firstly, that Michael was a ‘socialist in tooth and claw’ and ‘this Bill would result in more tax being paid, and we do not want that’. I stress; I paraphrase.

Not for the first or last time Rees-Mogg angered me. He was right to describe Michael as a socialist. But the issue of beating the tax gap is at least in part about upholding the rule of law. Why the Right can in any way tolerate tax abuse when it threatens one of the foundations of Conservatism is very hard to understand, unless and until you comprehend that they are not Conservatives at all.

And that they are not pro-business either. There is nothing remotely pro-business about tolerating tax abuse when the consequence is that cheating businesses obtain an unfair competitive advantage over those businesses that act in the long term interest of all their stakeholders.

Rees-Mogg’s attitude was about only one interest, which was and is the selfishness that puts the interest of individuals who are willing to abuse above that of all others, including honest competitors, the law, the state and by extension all others in society. It does not require a socialist to point out the moral bankruptcy of such a position, although it seems that it helps, and makes the Left the best friends honest businesses have on the political spectrum, in my opinion.

Second Rees-Mogg was wrong to say that beating the tax gap meant more tax had to be paid. It might, of course. But I strongly suggest that since tax is primarily a tool of fiscal policy designed to beat inflation above all other goals then revenue maximisation is not the goal of any government. Rather the aim should always be to raise the required amount of tax as equitably as possible to achieve that fiscal goal in ways that achieve the secondary (but vital) goals of redistribution, repricing market failure, reorganising the economy and reinforcing the relationship between the citizen and the state. I doubt Rees-Mogg would recognise any of these.

My message today is that this is what we have to do. If we are to reclaim our future proper understanding of the role of tax is vital.

However, as my research is now showing in work I hope to publish soon, this is not the case, and there are massive impediments to doing so.

Astonishingly, official and other research data on tax is frequently inaccurate.

So too often is GDP data, which makes tax gap estimation hard.

And even the number of taxpayers is frequently subject to misreporting between data sources.

At its most basic level understanding tax is hard because official statistics seem to be perversely dedicated to ensuring that we cannot know the truth.

And when it comes to tax gaps, there is too little research and even too much denial that the issue is of consequence.

Tax cheats, both domestically and internationally, are stealing tax revenues. That is beyond dispute. But the absence of data to identify the true scale of the issue and to target resources to addressing the issue is the surest indication that they have far too many partners in politics and officialdom who are far too close to the Rees-Mogg view for comfort.

There is, I suggest, official complicity in the maintenance of the tax gap. Ed Balls was once said to have commented that he would not like to live in a country that sought to collect all the tax owing to it. I disagree: I want a state to seek to collect all the tax owing to it, but no more (of course). And that’s because to do so is the foundation of economic and social justice. We are too far from both.