Labour’s Shadow Chancellor is today setting a tough new target for the Treasury and HMRC to cut tax avoidance and evasion by at least £7.5 billion a year in the next Parliament and a ten point plan to help deliver it.
Ed Balls 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.
He will also challenge the Tories to back Labour’s plan, which includes Labour’s pledge to abolish the 200 year old non-dom rules and action to tackle tax avoidance by hedge funds.
Measures in Labour’s plan also include changing the so-called ‘carried interest’ rules which allow private equity managers to pay lower rates of Capital Gains Tax – instead of income tax – even when they are not investing much of their own money.
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.
Labour’s ten point plan sets out a series of measures it will take in order to help raise billions of pounds a year and protect the nation’s finances.
In addition to abolishing the non-dom rules which Labour has said will be used to help get the deficit down, the concrete tax avoidance measures we have set out – including new measures today and Labour’s changes to pension tax relief for the very highest earners – will mean Labour can fully fund our NHS Time to Care Fund, abolish the bedroom tax and cut tuition fees to £6,000. Additional revenues raised over and above this will be used to help get the deficit down.
Ed Balls, Labour’s Shadow Chancellor, said:
“The Tories have spent the last week explaining why they won’t tackle tax avoidance and defending the non-dom loophole.
“They just don’t understand that when working people are paying more in tax it’s a scandal that some people can get away with not paying their fair share.
“The Tories can claim they’ll raise money from tackling tax avoidance, but the amount of uncollected tax has gone up under this government. And when push comes to shove they refuse to close the loopholes or take the tough action that will make a difference.
“It will take a Labour government to call time on this lax approach and launch an assault on tax avoidance.
“We will set tough targets for HMRC to reduce tax avoidance and evasion by at least £7.5bn a year. Our ten point plan will take the tough action needed to help us get there and we will start on day one of the next Labour government.
“We will close the loopholes the Tories won’t act on, increase transparency, toughen up penalties and abolish the non-dom rules. And our first Budget will make sure that, following an immediate review of HMRC, it has all the powers and resources it needs to come down hard on tax avoidance and evasion.
“Working people who are paying more in tax want everyone to pay their fair share. And there shouldn’t be one rule for a few and another rule for everybody else. The Tories should back Labour’s plan and stop defending the indefensible.”
Ends
Editor’s notes
Labour’s Ten Point Plan to Tackle Tax Avoidance:
-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
Labour’s £7.5bn target for cutting tax avoidance and evasion
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.