Tackling Tax Avoidance and Evasion

At Prime Minister's Questions on 13th April 2016, the SNP's parliamentary leader, Angus Robertson, confronted David Cameron about tax evasion, claiming that there are ten times more government staff were investigating benefits fraud than tax avoidance. Alternative figures from the Guardian show 3,700 employees at the department for work and pensions investigating benefits fraud, compared to 700 working on tax evasion by the richest in society. This is in spite of the fact that benefits fraud - which costs an estimated £1.3bn per year - is worth a fraction of the value of tax avoidance. These figures show part of a huge problem: the staff and resources dedicated to reducing tax avoidance are simply insufficient to make a real impact. In spite of this, the government continues to cut HMRC's budget.

If the government is to force unwilling individuals and corporations to pay tax, it must invest in the capacity to identify and crack down on those limiting their tax liabilities. Drawing on the recommendations of a September 2016 report conducted by Professor Prem Sikka, our campaign is calling for an end to self-defeating budget cuts at HMRC, and the creation of a new unit specifically to tackle corporate tax avoidance. According to some estimates, each pound spent on tackling tax avoidance would earn HMRC an additional ten.

Our report also demands measures to improve the customer service that HMRC provides, making it easier for willing individuals to pay tax and for the government to supervise the tax affairs of large companies. According to HMRC, non-payment and error account for about a fifth of the annual tax gap, and a more efficient and helpful tax service would surely go some way to amending this. This would be another step requiring the government to commit to investment in HMRC, but one which would certainly see benefits in the long run.

In addition, the complexity of tax regulations makes it far easier than it should be to minimise tax liabilities. Thousands of pages of tax regulations are surely unnecessary, and only make it easier for creative accountants to dodge taxation. And yet successive governments have increased the tax code to around ten million words in length. A simpler, shorter tax code that provides fewer routes around the moral responsibility of tax appears a logical step towards tackling tax avoidance.

It is also important that the government cracks down on the so-called 'hidden economy', in which workers (and employers) do not officially declare their incomes in order to avoid tax. The latest tax gap report from HMRC showed activity in this 'hidden economy' as the single largest source of lost tax revenue. Tighter regulation of employment practices that reduces the possibility of people working this way, together with incentives to work in the 'formal' sector, are necessary in order to recover billions of pounds the government should be owed.

Click here to view Professor Sikka's report on reforming HMRC

 

Read Christians on the Left's background information on tax evasion

Find out how much tax aviodance and evasion costs us

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