Julian Huppert writes… Clamping down on Tax Dodging

Tax dodging is plain wrong. There can be absolutely no justification for the wealthy not paying what they owe.

More than any other party, we know how important it is to have a fair tax system. Before the last elections, we pledged to lift the income tax threshold to £10,000. We have surpassed this by raising it to £10,600, lifting more than 3 million low earners out of paying income tax altogether.

At the top, we’ve made sure more people pay their fair bit. We’ve set up a new special unit – the first of its kind – to tackle tax dodging and beefed up criminal prosecutions for tax evasion. Our ‘google tax’ announced in the latest Autumn Statement is yet another move we’ve taken to show international companies they must pay their fair share.

And our approach is working. The IFS report last week confirmed the richest have contributed the most since 2010. It is expected we will have brought in an additional £7 bn by the end of the 2014/15 financial year.

But we absolutely must continue moving forward. There are still far too many individuals and companies exploiting loopholes and using clever accountants to dodge paying tax.

That’s why the Stop the Global Tax Dodge campaign is so timely. A coalition of charities – including Oxfam, ActionAid, Christin Aid, NUS, the Equality Trust, amongst others – are saying political parties should commit to doing more to clamp down on avoidance and evasion in their manifestos. They are absolutely right. We must make the tax framework simpler and more transparent, and get even tougher on those who think the rules don’t apply to them.

David Laws, our Manifesto Working Group chair, has made it clear that our Manifesto will set out new measures to tackle tax dodging. It is essential it does. Without it, we won’t be able to bring in the extra resources to invest in our future.

Liberal Democrats know that without innovative solutions we can’t continue to make society fairer. Moreover, we are the only party that really has the will to take on vested interests and make sure everyone pays their bit. More than ever, we need to continue standing up for what is right and make sure people at the top pay what they owe.

* Julian Huppert was the Liberal Democrat MP for Cambridge from 2010-15

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12 Comments

  • Eddie Sammon 27th Jan '15 - 4:47pm

    Without specific proposals the rhetoric of “going after tax dodgers” is just populist straw man drum banging.

    Vince Cable has introduced tax breaks for investment with increased capital allowances, allowing people to basically claim depreciation costs even though they haven’t occurred, should we go after people who claim these?

    HMRC is acting like a ruthless payday lender, compounding people’s tax debts, often for the poor, should we increase these in order to “get tough”?

    The General Anti Avoidance Rule charges people tax that isn’t due on a basis of “pay now, claim back later”, is this good?

    Regards

  • What do you mean by tax “dodging”?

    If tax evasion, yes that is illegal and wrong. If tax avoidance you are attempting to impose you own subjective morality on others and against human nature.

    If you yourself had sufficient assets to set up legal means to protect yourself from exposure to tax I assume you would. Not to do so would be, frankly stupid. Why pay more tax than you have to?

    I certainly wouldn’t condemn you for it.

    What I do condemn is this nauseating attempt to assume the moral high ground. As I have said before on this website, if you think taxation is so morally wonderful why don’t you write a cheque to HMRC over and above your tax bill to demonstrate your own personal commitment to the cause?

    Why doesn’t everyone else on here? If every Liberal Democrat member did that quite a tidy sum would be raised?

  • A example why people are sick of the established political class, first you design these systems with loop holes then until recent never pursued the big boy dodgers you picked on the easy little man. Both Labour and Conservative and now Lib Dem in Coalition have brought us recessions wars we did not want then death on our streets allied with evil dictators and stumble along from one crisis to the next along with cover ups and taking of our liberties / freedoms away.
    So why should we have faith in you and in clearing loop holes up and can fix things?

  • Large scale tax avoidance is a consequence of the free movement of capital within the EU.

  • Stephen Donnelly 27th Jan '15 - 9:54pm

    The key thing that Julian recognises is that the tax system needs to be made simpler and more transparent.

    Eddie seems very confused about capital allowances. The tax breaks introduced by Vince Cable have encouraged investment by allowing the whole cost to be set against tax in the current year, subject to some sensible limits. I struggle to understand what a ‘depreciation cost that is not there’ is.

  • Eddie Sammon 27th Jan '15 - 10:28pm

    Stephen, I am not confused, if someone buys a new machine it doesn’t lose 100% of its value in year one, so why can they write 100% of the cost away from it in year one? What happens if you sell it? You would have claimed for a loss that you didn’t make.

    Vince makes a lot of good economic points, but as others have said on here recently: he is not the genius that others make out.

  • Eddie Sammon 27th Jan '15 - 10:38pm

    Stephen Donnelly, to explain further:

    “Capital Allowances let taxpayers write-off the cost of certain capital assets against taxable income. They take the place of depreciation charged in the commercial accounts, which is not normally deductible for tax purposes.”.

    https://www.gov.uk/government/collections/capital-allowances-manual

    The reason we have capital allowances is because of depreciation costs, but now they are too generous.

  • Eddie Sammon 27th Jan '15 - 10:51pm

    Sorry, I’ve just remembered about balancing charges, but I don’t understand them properly anymore. These apply when you sell an asset.

    The system is too complicated and should just be based on depreciation, which is simple.

    Apologies. I’ll shut up for a bit. 🙂

  • Mark Littlewood 28th Jan '15 - 1:13am

    I will continue to buy my cigarettes duty free and/or from cheaper tobacco tax jurisdictions.

    I am on the affluent side of the income spectrum, but I intend to continue to dodge tax in this way. And in many others.

    For example, I am moving a fairly modest slice of my investments (about £5,000 per annum of savings) off shore – mainly to high growth nations in Latin America and Africa. I am doing so to avoid UK tax, as far as I am legally able.

    I guess I am one of the “far too many individuals and companies exploiting loopholes and using clever accountants to dodge paying tax”.

    I do employ an accountant. I consider him quite clever. I pay him to advise me on my tax liability and to advise me on how to best mitigate/reduce it.

    If Julian Huppert wishes to stop this sort of behaviour, he is going to need a surveillance state far, far beyond the Tory measures he has apparently been lobbying against.

    He won’t get it, thankfully. I anticipate liberalism will prevail despite his absurd efforts to the contrary.

  • Alex Sabine 28th Jan '15 - 4:59am

    @ Mark Littlewood
    “If Julian Huppert wishes to stop this sort of behaviour, he is going to need a surveillance state far, far beyond the Tory measures he has apparently been lobbying against.
    😉
    I applaud Julian’s lobbying against the surveillance state, but I do sometimes notice that the Lib Dem commitment to privacy, equity and due process wobbles a bit when there is a chance to grandstand on taxing the rich. A high-minded end does not justify any means. As I’ve argued before on this forum, distributional equity is one important dimension of fairness. It is not the only one. Procedural fairness, natural justice and avoiding arbitrary or retrospective actions matter too, or should do for liberals at any rate.

    As for tax avoidance, there is a flicker of recognition in Julian’s piece as to the root cause of the problem. As he says, “we must make the tax framework simpler and more transparent. Amen to that. I will be interested to see the proposals to this effect that he, David Laws and the manifesto group come up with.

    Parties tend to like making rhetorical commitments about simplifying the tax system, yet their acts and omissions make it more complex by the year. Gordon Brown was the master tinkerer, tripling the length of the tax code – but the coalition, notwithstanding minor successes thanks to the likes of John Whiting, has been little better.

    Didn’t the Autumn Statement include a tax break for the children’s TV industry and a tax break for orchestras to go with the video games tax break and Brown’s film tax breaks? The supposed benefits are loudly proclaimed, the beneficiaries are duly grateful, political capital is earned; the costs, in complexity and distortions and loopholes – and a higher tax burden for the non-favoured sectors – are less obvious but no less real. Cumulatively all this corporate welfare has helped in no small measure to make the tax system the mess it is today.

    It is part of a wider hubris whereby the state believes it knows best which sectors of the economy deserve, or require, special help and attention because they are the ‘economy of the future’, while others need to be prodded, cajoled or simply abused. Vince Cable has embraced this agenda with the zeal of the convert, having argued not so long ago that the DTI/Business Department itself should be closed down. As I see David Laws wryly noted in his keynote speech at an event marking the 10th anniversary of the Orange Book, “progress by Vince on his other key pledge – to abolish the Business Department – has been somewhat slower”.

    The principal reason to simplify the tax structure and move to a default position of broad neutrality (as between different sectors, types of economic activity and forms of income) is to minimise the costs to economic welfare associated with raising a given amount of revenue. Another important effect would be to make the system less arbitrary and more equitable in its treatment of taxpayers in essentially comparable positions.

    But it would also be a much better way of tackling avoidance at source – by removing the incentives and opportunities for it – than preaching and exhorting from a moral pulpit while enacting reams of anti-avoidance provisions that will only breed new loopholes and new fancy schemes that will in turn require more ‘crackdowns’.

    Nicky Kaldor surely hit the nail on the head when he said: “The existence of widespread tax avoidance is evidence that the system, not the taxpayer, is in need of reform.”

    The IFS expanded on this in their conclusion to the Mirrlees Review: “One of the central problems of dealing with tax avoidance in the UK has been the propensity of governments to tackle the symptom, by enacting ever more anti-avoidance provisions aimed at the particular avoidance scheme, rather than addressing the underlying cause – often the lack of clarity or consistency in the tax base.

    “If activities were taxed similarly, there would be no (or, at least, much less) incentive for tacpayers to dress up one form of activity as another… The primary response should be to address the fundamental causes of avoidance rather than blindly resorting to anti-avoidance provisions, whether of a general or a specific nature. Simply demonising tax avoiders and exhorting them to behave better is a feeble strategem.”

    Now we just need politicians to grasp this nettle and stop all the displacement activity…

  • The problem is that both Labour and Tory governments and this one too have largely ignored tax avoidance because of a mistaken belief in the trickle down theory. We all know that this hasn’t worked but the result has been that our society is starting to look more like one from pre industrial revolution times than a modern one. The gap between rich and poor is widening and the middle classes are expected to provide much of the Governments’ tax take at the same time as price rises are preventing them from becoming home owners and indulging in conspicuous consumption. So what , you may say. Well a rising middle class is a pre requisite for a capitalist society and a successful economy. Weber propounded this theory which is supported by the growth of the Chinese economy for example.. It’s the middle classes rather than the elite which drive economic growth,
    I believe Governments have connived at tax avoidance and what is needed now is a clear drive to prevent this and to close the loopholes. The tax system is overdue for reform and simplification as is the benefits system.
    As a pensioner I refuse to use my bus pass and give my winter fuel allowance to others because we should make sure that need is the criterion for all benefits rather than trying to buy votes . In these stricken times every useless penny spent should be withdrawn.

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