According to the Guardian Jeremy Corbyn said this on Friday:
We believe that the real divide in our society is not between people who voted yes or no for independence. And it's not between people who voted to remain or to leave the EU. The real divide is between the many, who do the work, create the wealth and pay their taxes, and the few, who set the rules, reap the rewards and dodge their taxes. So let me spell it out: our mission is to back the working class in all its diversity.
I regret to say that Corbyn is wrong abou this. Of course there is a class divide in the UK. That is indisputable. But it is completely untrue to say that what differentiates the classes is tax dodging. That, I have to say, is a universal fact of life.
I am not disputing that there may be a difference in the ways that the classes dodge taxes. Contrary to popular perception, I would suggest that large companies evade very little tax. They do avoid it, of course. I am not for a minute suggesting otherwise. That's true.
This pattern of behaviour may also, very largely, be true of the wealthy in the UK i.e. they too largely avoid rather than evade tax, with a focus on taxes on capital in their cases. This is more contentious. I am aware that Gabriel Zucman has suggested that much of tax evasion may be by the top 1% of earners, but I am by no means convinced of many of Zucman's stats, including his very selective estimation of the sums recorded in tax havens that might give rise to evasion, so I am very far from convinced. That is largely because of his methodology, which is based at least in part of extrapolation of the outcome of tax audits. These do, of course, focus most heavily on cases where the yield is likely to be highest: for once I would suggest there may be over-sampling of the wealthy in this case. In any case, even he has to conclude that evasion is not the sole preserve of the wealthiest.
And my own research, which is much more broadly based, makes clear that has to be true. When preparing my latest estimates of the EU tax gap for the EU Parliament's Socialist and Democrats Group I looked at data on the shadow economy, including data from the European Commission on unpaid VAT. My estimate was that EU wide tax evasion might amount to €825 billion a year. Of this maybe €87 billion (more than £70 billion, depending on the exchange rate chosen) is in the UK. This contrasts with the HMRC estimate of £33.4 bn, of which £26.4 bn at most could be described as evasion and just £7bn as avoidance. As I have long argued, HMRC are in denial about the true scale of this issue, largely because they too rely on extrapolation of tax return audits and not data for the economy as a whole, and the cheats (which will very often be companies registered in the UK without any evidence of their owners being recorded) simply do not appear in the HMRC system.
But let's be clear: if, as I think, at least 10% of the UK economy is unrecorded (and this is what all peer-reviewed evidence suggests) and much of this is identified by non-recording consumption, then this cannot be done by the wealthy alone. They are wealthy, but they could not fail to record so much of what they spend without the active connivance of hundreds of thousands and quite likely millions of others who are in receipt of that spending and who would not declare it to HMRC. More plausibly, the non-recorded spend and non-recorded income is spread right across the economy and anyone with eyes to see and ears to hear knows that to be true. The builder, cleaner, coach, and trader taking unrecorded cash are all part of this problem, as are countless others. They are not wealthy. Many, I know, may just be trying to make ends meet. But they all break the law. And they all contribute to the tax gap. And they all undermine a fair tax system, and honest taxpayers.
Unless Labour acknowledges this it will allocate resources to the wrong issues when seeking tax justice.
And it will not direct enough resources to HMRC to put matters right.
It will also not ask the right questions about how to correct the income distribution.
And for those reasons I found the claim made disappointing.
This was headline-grabbing with a false claim. That is really not wise. At least, it's not in my opinion. And I am willing to say so.
Many would like to think the problem of tax justice solely relates to abuse by large companies and the wealthy, and mainly relates to tax havens. It does not. Those are issues, of course, but to be honest they are not the big issues anymore. My data and HMRC's data suggests the problem is largely domestic and relates to evasion and not avoidance.
It's time for tax justice to say so too.
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My golf instructor (£50ph), sons, driving instructor (£40ph), our cleaner (£12ph).. all cash in hand and pretty sure they don’t declare everything. More brazen is many builders who quote two prices, one for cash and one for another form of payment…dodging tax is a benefit of the self enployed. PAYE is a different basis
Not exactly related to tax – but what strikes me, in the ‘divide in society’, is how EXPENSIVE it is to be poor: everything costs more when you don’t have spare cash or capital, from ‘3 for 2’ deals in the shops right through to earning interest on savings. Take pay day loans, with thousands of percent interest – not something you need if you are financially secure. There are so many things here as part of our (neoliberal) society that act against the poor, to keep them poor. How does fair tax solve this? As for it not just being the wealthy that dodge tax, it seems that unless we have a fairer system overall, I can’t find it in myself to blame the poorer in society for dodging tax. ‘Avoidance’ of tax is a mechanism only open to the richer in society.
As for Labour, they talk a good socialist thing, but they have proved time and again they don’t put actions to words, they are hypocrites (as a group). How is that Labour administration in Wales working out for Wales? Labour in Scotland is a whole other matter that I could rant on about for a very long time – from PFI, to equal pay for women – they have failed on all measures. The hypocrisy knows no bounds – they talk about free school meals for primary school children as a policy, but at the same time actively vote against its introduction in the Scottish Parliament (and hope we don’t notice?) as an example (and there are many).
Anything Labour say – don’t believe it. (Abolish the House of Lords ,,, you’ve got to laugh, that’s been their policy for a hundred years, through many Labour administrations!).
‘We believe that the real divide in our society is not between people who voted yes or no for independence’.
Hmmm…………….it seems that Jez does not get out and about much these days then?
Just what we need – another out of touch politician.
I despair…………………
Join the club
This was a great speech, for a long time ago
Do you think that Labour knows the difference between ‘avoidance’ and ‘evasion’?
Now you are being cynical
But the question may be well placed
I know many politicians do not
Richard – I often forget the difference between the two I must admit.
…and quite a few MPs don’t know the difference between deficit and debt. I remember the BBC doing a really scientific bit of research (not) a good while back.
Tax is paid but alas on their income and capital gain. But as you and others have pointed out many times…not on their wealth.
Totally agree the point of aggregate tax gap in the Shadow economy. It seems as though this obvious to all but HMRC. They simply are not interested even when pointed out to them and the sums are in the 10s of thousands.
M
OT
Glad to see your name in this group….. Thank you Richard
https://themammothwhale.wordpress.com/2019/02/25/16-economic-experts-who-back-a-new-scottish-currency/?fbclid=IwAR1JgQJrNpDTkql1pu7TddNKpg5syhvyG8iffnD1pxGHFvw7awtOsHzsof4
I was too, to be honest
If you look down the list it’s a who’s who of the MMT community..they obviously see Scotland as a good “test case”. If the currency collapses and it all goes wrong then it is exactly that for theses people, an experiment that has gone wrong. There living standards will be the same just their ego bruised.
Utter nonsense
That is not how these people view the world
It takes a lot of courage to stand out from the crowd
I think the underlying point here is that the vast majority of employed people pay their taxes PAYE which means that they have no opportunity to evade or avoid tax. The way that working people have these taxes deducted before they are paid seems to suggest that it’s only the wealthy, self employed or crooked people who are ‘trusted’ to pay their taxes at year end which gives them ample opportunity to avoid or evade…
Oh come on….
They may have no chance in their employment
Second activities are rife
I think the answer is to keep on talking about it.
Yes, there’s a difference (and a quite profound one) between evasion and avoidance – but both end up with the same effect. Tax goes unpaid. Tax needs to be paid or the economy stops working. It really is that simple.
I can remember when the campaign to get people to wear seat belts took off… and the campaign to stop drink driving. Through publicity and open conversation, both of these things are now seen as extremely antisocial. No right thinking person would dream of getting behind the wheel of a car whilst drunk – and certainly nobody would have sympathy for them anymore when the full weight of the law was thrown at them. It used to be just one of those things that happened and now we’ve made it a common understanding that it’s just wrong.
That’s where we need to be with people not paying their dues. We need a prolonged advertising campaign (like the old Public Improvement Films – remember those? “Charly says pay your taxes with a smile – or you’re mucking it up for everyone else!”… that’d be a good one). Get the message out early – schools would be a good place to start. We need to bring it to the forefront of everyone’s understanding that tax evasion is not a victimless crime and that tax avoidance isn’t OK just because it seems to be legal if you squint at the legislation. Only when the Now Legendary Man on the Clapham Omnibus* gets the message will tax justice stand the chance it deserves.
* – Other omnibuses are available
Agreed…