Labour soars ahead with plan to tackle tax avoidance

Labour's proposals follow the revelations of tax avoidance on a massive scale at HSBC Bank while it was run by Stephen Green - who later became a Conservative lord and minister.

Labour’s proposals follow the revelations of tax avoidance on a massive scale at HSBC Bank while it was run by Stephen Green – who later became a Conservative lord and minister [Image: Daily Mirror].

In a clear response to the HSBC tax avoidance revelations, Labour is setting out its plans to tackle the issue if elected into office after May’s general election.

With campaigners and non-government organisations calling for a “Tax Dodging Bill”, Labour has announced that its first Finance Bill will act to tackle tax avoidance – and was due to set out the measures in an Opposition Day Debate today (Wednesday, February 11).

Labour’s motion notes that just one out of 1,100 people who have avoided or evaded tax have been prosecuted following the revelations of malpractice at HSBC bank, which were first given to the government in May 2010, after the Conservative and Liberal Democrat government had taken office.

It also calls upon Lord Green and David Cameron to make a full statement about his role at HSBC and his appointment as a minister in 2011.

The proposed Finance Bill includes plans to:

· Introduce penalties for those who are caught by the General Anti-Abuse Rule

· Close loopholes used by hedge funds to avoid stamp duty

· Close loopholes like the Eurobonds loophole which allow some large companies to move profits out of the UK and avoid Corporation Tax

· Stop umbrella companies exploiting tax reliefs

· Scrap the “Shares for Rights” scheme, which the OBR has warned could enable avoidance and cost £1bn and is administered by HMRC, and so ensure HMRC can better focus on tackling tax avoidance

· 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

Labour’s measures to tackle tax avoidance will also include:

· Ensuring stronger independent scrutiny of the tax system, including reliefs, and the government’s efforts to tackle tax avoidance

· Forcing the UK’s Overseas Territories and Crown Dependencies to produce publicly available registries of beneficial ownership

· Making country-by-country reporting information publicly available

· Ensuring developing countries are properly engaged in the drawing up of global tax rules

Shadow Chancellor Ed Balls said: “David Cameron and George Osborne have totally failed to tackle tax avoidance in the last five years. They have failed to close the loopholes we have highlighted, and the amount of uncollected tax has risen under this government.

“I am determined that the next Labour Government will act where the Tories have failed. We will close loopholes that cost the exchequer billions of pounds a year, increase transparency and toughen up penalties – and we will act in our first Finance Bill.”

Shabana Mahmood MP, Labour’s Shadow Exchequer Secretary, said: “The Tories and Lib Dems should back our motion to show that they are serious about tackling tax avoidance and evasion. We have a clear plan for our first Finance Bill after the election – they need to back that or explain why they don’t.”

This is a terrific move by the Labour Party. It seems clear that Labour was planning to tackle tax avoidance in any case – and should gain recognition for that alone, after the Coalition Government spent the last five years blowing hot air at us and doing nothing.

But it’s not perfect. Richard Murphy, of Tax Research UK, wrote yesterday evening: “There is no commitment to extra funding at HMRC. Nothing will happen without that.

“There is no direct reference to the tax gap and making explicit that these issues are meant to close it. Whilst HMRC works with the current deficient version of the tax gap this problem cannot, again, be resolved.

“I want a general anti-avoidance principle, not a revised General Anti-Abuse Rule, but penalties sure as heck help.

“There is no mention of the extra resources needed to make sure Companies House works properly, which is as important as the changes in dormant company reporting.

“There is no mention of BEPS implementation or action on things like permanent establishment and controlled foreign companies.

“And there’s no Office for Tax Responsibility as yet (although the hint of one has, I note appeared, so I am hopeful).”

All these criticisms are valid and it is to be hoped that Labour will adapt its bill to accommodate them. Even if this does not happen, Mr Murphy himself adds: “Let me stop complaining for a moment because I will probably never be completely satisfied.

“This is a package that indicates commitment to listen and commitment to change. It is a package that looks across the board at the issues of concern. And it addresses a fair range of items into debate. I welcome that, of course. The devil is always in the detail but there is room for manoeuvre in here and many statements are moves in the right direction when those are sorely needed.

“That is what is needed for now, and I’ll take it at that level.”

Do any of the other parties have anything at all to say?

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  1. cnhay February 11, 2015 at 11:22 am - Reply

    Labour should have been doing this 15 years ago this is not a recent fenomen tax evasion , i am very disappointed with labour that they have now just decided to make this part of there policy for the next General election especially when they were in power for so long and if they intend to use the argument that they were unaware of this pracrise then they should not have been in government.

    • Mike Sivier February 11, 2015 at 11:33 am - Reply

      And how many people were clamouring for tax evasion/avoidance to be tackled in 2000?
      I was a newspaper editor at that time and I can’t recall hearing a whisper about it.
      No government can react to a problem if it hasn’t been alerted that the problem exists.

    • Rupert Mitchell (@rupert_rrl) February 12, 2015 at 7:38 am - Reply

      We are living in today’s environment, not that of 15 years ago. Far better to tackle any sort of malpractise or lack of action late than never. Well done Ed!

      Please explain why tax evasion is illegal and tax avoidance isn’t. Surely both deprive the Exchequer of funds. Surely if profits are made in any country that is the country in which tax should be paid and if everyone was honest about it then taxation would fall for everyone.

      • Mike Sivier February 12, 2015 at 12:37 pm - Reply

        I thought I already did explain the difference between evasion and avoidance.

  2. NMac February 11, 2015 at 12:03 pm - Reply

    Mike is absolutely right. This issue has only become widely realised and reported upon since 2010.

    • hstorm February 11, 2015 at 8:13 pm - Reply

      Er, I wouldn’t agree with that. Robert Peston, who’s as unquestioningly monetarist as a journalist can be, reported how serious the problems of tax evasion and avoidance are in a book he wrote way back in 2008.

      And he’s a monetarist! Those are the sorts of morons who make an art of refusing to notice plutocratic excess. If *he* was admitting it in 2008, it had to be because it was common knowledge.

      There was even this article on the BBC website in 2006.

      Again, if the BBC are bringing attention to it that far back…

      I’d say what is closer to the truth is that there was a tendency in the big media before the start of Austerity not to want to talk too much about tax-dodgers. For my own part, I recall that there were plenty of heated conversations I was having as far back as the mid-1990’s (especially some quite vitriolic arguments with my sadly-Thatcherite late father) about how little tax the rich were paying, and how much they were evading.

      It was a public conversation well before 2010, even if it wasn’t getting much space in the media.

  3. annak53 February 11, 2015 at 4:21 pm - Reply

    Better late than never I guess. Certainly very welcome news all the same.

    Let’s hope they now right the wrong re the accelerated rise to the State Pension Age. We paid our (compulsory) taxes all of our working lives only to have been denied our State Pension.

    This petition is currently at 40,500. I’ll be presenting it to soon. Please sign and continue to share. Thanks

    • Mike Sivier February 11, 2015 at 4:51 pm - Reply

      40,500 is a pretty hefty figure – hopefully it’s enough to make ministers take notice but more would certainly be welcome!

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