WTNML: Open up the income tax system

January 3, 2012 7:23 pm

Over the next week, we’re going to be posting articles as part of a series taking at look at what Labour’s about “When there’s no money left” (or WTNML for short). As our editor wrote before Christmas:

“In addition to thinking beyond narrow alleyways of thinking on spending and the state, we’ll also need to think beyond narrow areas in which and means by which the state can operate. We think that these kind of changes in society are not only possible, but necessary, and must form part of Labour’s next manifesto…We can’t wait until the next election to develop these ideas – we need to start now, shape the debate, and make such ideas as mainstream as the minimum wage.”

The first of these ideas is published below:

One of the serious problems we face is that too many people, especially the rich, evade or avoid income tax.  While there is no simple answer to the problem, putting increased resources into HMRC obviously helps. But I believe there is one simple thing we could do that would malke a real difference.  Why not bring the whole process out into the open.

I propose that all income tax returns of anyone living in the UK should be in the public domain.  These should also include a nil return for those not paying any income tax at all.

The benefit would be to highlight those who are evading tax or pinpoint those who are earning large sums and paying little.  The present levels of tax evasion and tax avoidance are large and they penalise ordinary people who pay their money usually through PAYE and don’t cheat the system.

The only serious objection that might be put forward is privacy. The question is how strong a right to privacy should there be.  For quite a number of people in the public sector their earnings are already in then public domain and they pay through PAYE.  It’s the very rich who benefit from secrecy about their incomes and bonuses and how little  tax they pay.  Already the publicity about enormous bonuses is beginning to put pressure to bring them down, though there is a long way to go.

The benefit of this proposal would surely outweigh arguments about privacy.  There could, however, be a limited right of appeal that certain items should be confidential, perhaps to protect  privacy where there are special circumstances such as family members who are disabled.

The cost of implementing the proposal would be relatively low as access would be online and tax returns are increasingly being submitted electronically.  In any case the cost of the scheme would quickly be recovered through lower levels of evasion and avoidance.

How would this happen?

We should not underestimate public opinion and the resulting public pressure.    From time to time we hear of people who earn more than the total incomes of all Fabian Society members but pay virtually no income tax.  Could they withstand public scrutiny?  And could HMRC avoid taking an increasingly tougher line with the tax dodgers.

But make no mistake; the rich would fight tooth and nail against having to reveal their earnings and the tax they pay.  Let’s watch them justify their tax returns!

Lord Alf Dubs is a Labour member of the Lords.

Got an idea for what Labour should stand for “When there’s no money left?” – email us. We’ll be conducting a poll of the best entries, and the winner will present their idea to a “Dragon’s Den” at the Fabian New Year conference.

  • http://twitter.com/Old_Holborn Old Holborn

    So you spent it all, left the country bankrupt and your answer is to grab MORE money to spend, via the barrel of a gun.

    Best of luck with that one

    • http://twitter.com/Newsbot9 Newsbot9

      And your solution of shooting the poor is SO much better.

  • Anonymous

    This will be seen as yet another Labour infringement on privacy. Close loopholes and employ more tax inspectors.

    • http://twitter.com/Newsbot9 Newsbot9

      Won’t work. The system is riddled with too many of them.

      We need to scrap it and start over. In, say, a year. Same base rates. Website to consider exceptions, and a team of economists to go over them. I’d bet on under 100 exceptions being necessary.

  • Anonymous

    perhaps present and past Labour MPs and Peers could set an example by volunteering such information?

    • Anonymous

      And lords who are Non Dom’s

    • http://www.figurewizard.com Joe Jonkler

      Remember the heavily redacted expenses forms they posted on the Net? All in the interests of privacy, notwithstanding the fact that it was actually our money we were asking them to account for.

      • http://twitter.com/Newsbot9 Newsbot9

        Really, so, you won’t mind posting your economic details. After all, your economic spending affects mine, so it’s “my” cash

        • Anonymous

          How?

          Your logic seems pretty lacking

          • Anonymous

            It’s not going to work you’d have the rich like Blair who has used the courts to hide his expenses, state I’m now a Non Dom

  • http://twitter.com/Gaylussite Na2Ca(CO3)2·5H2O

    Why is what I earn any of your or anyone else’s business?

  • Raymond Carlin

    Not a great idea tbh, yet so very typically Labour. Launch a large IT project (for that’s what it is in reality) without any thought to what the benefits are (outside their own heads) or whether the benefits can actually be realised.

    Two immediate, glaringly obvious flaws….

    1) What proof is there that information being in the public domain will make people pay more tax (voluntarily or otherwise)? Would perceived shame or guilt make a person on £500k want to pay an additional £100k tax just to ease a conscience? Highly unlikely.

  • Raymond Carlin

    2) What evidence is there to suggest that this info being in the public domain would cause tax laws to change? As that’s what would have to happen for any financial benefits to be realised. Regardless, HMRC currently have all this information and choose to do nothing with it other than what they already do . Making it public would be simply pointless other than to allow the green-eyed to rant and rave a bit about their neighbours paying more/less , without knowing anything about the intricacies of tax law.

  • Anonymous

    The proposal has a massive flaw – it assumes that those very rich individuals actively engaging in tax avoidance will be shamed into paying more taxes. They won’t!

    From various reports in the papers we already know of numerous very rich individuals who engage in tax avoidance, splitting their time between countries to ensure they take full advantage of low tax rates in their ‘nominal’ country of residence. Exploiting tax relief available to off-shore entities and the preferential tax rates available on capital gains.

    I don’t want to know how much they earn, I don’t care how much they earn. I want a tax system that is robust enough to ensure they pay their share.

  • http://www.fcablog.org.uk Christie Malry

    Go on then, Lord Dubs.  You first. Otherwise we might not believe you’re serious about this.

  • GuyM

    Bonkers idea, infringing yet further on civil liberties and privacy.

    Why on earth should what I earn be open to the public or even work colleagues?

    Go for it, a sure fire way to lose votes.

  • jaime taurosangastre candelas

    Maybe I’m naive, but the self-assessment tax return is hardly a model of openness.  Mine each year has a few figures filled in, some basic calculations, and some final figures.  As I only have one source of income, which is taxed at source, it could hardly be less interesting.  How much are the seriously rich going to be able to take “off-tax return”?  I have read of some city people being given bonuses in vintage wine or Portuguese gold coins to evade the tax (quite legally – perhaps the effort should be into closing down those little adventures).  Would all of that lot be declared, or would their tax returns look like mine, some fairly boring figures?

    • http://twitter.com/gonzozzz dave stone

      Not sure that naivety comes into it. The self-assessment returns are, in fact, a model of imaginative accounting and frankly, imagination greases many wheels including those of the economy – hence the emphasis often placed on ‘confidence’.

      You can be assured ‘their’ tax returns will look very similar to yours and feature “some fairly boring figures”, this is what accountants are paid for.

      • Anonymous

        Always take the tax man out for a fish and chip dinner seems to work for the rich….

  • Tom Poynton

    Same old Labour, obsessed with everyone else’s business.

  • Aless Bieri

    If this does ever come in the only result will be the conclusion that it’s mainly the poor who aren’t paying “enough” tax. It’s those who work in the informal economy and the self-employed who are most able to avoid tax, not the rich who mainly work in large organisations which have to produce proper accounts.

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  • http://twitter.com/richardcalhoun Richard Calhoun

    U socialists at it again, no freedom for the individual, just harassment and taxation until the pips sqeak!!
    Why not do something constructive, advocate a Flat Tax and promise to implement it at the next election?

    • http://twitter.com/Newsbot9 Newsbot9

      Sure. 50% sound reasonable? (It’s the kind of figure you’d need…)

      • GuyM

        I’m sure with a 50% flat tax rate the levels of business migrations and those of us able to work abroad would leave you with a socialist paradise…. you and a few sheep basically

  • http://twitter.com/EssexJames James Rigby

    I don’t know where to start!  So many flawed assumptions, so little understanding of the tax system, and no acknowledgement at all that the reason people who can avoid tax choose to do so is because they can.  Most people on PAYE would avoid it if they could.  Instead of this Stalinesque proposal, why not just ask people if they want to give a proportion of their income to a bunch of fools in government who waste it on wars, benefits, government “machinery”, and other frippery.

  • http://www.figurewizard.com Joe Jonkler

    ‘The only objection is privacy.’

    That is precisely what makes this eye popping nonsense objectionable.

  • Barry

    Why not actually look to reduce what the state does and, by doing sim reduce the amount of tax needed to fund it?

    In fact, lower levels of state means higher growth rates and more cash to solve the problems we all face in life.

  • JC

    Firstly, we should stop conflating tax avoidance with tax evasion. Evasion is done by people who are against the state, whereas avoidance is encouraged by incompetent politicians. If the tax laws were simple, then the more extreme forms of avoidance would not be possible, and the simple ones (ISA, personal allowance etc) could be encouraged.

  • Anonymous

    One of the worst and most ill thought out ideas I have ever heard.

    If the means already exist to display and “…highlight those who are evading tax or pinpoint those who are earning large sums and paying little.” why not get HMRC to do their job? Utterly stupid.

    “  For quite a number of people in the public sector their earnings are already in then public domain and they pay through PAYE.”

    Earth calling HoL. Earth calling HoL. Many people DO NOT work in the public sector.  

    “The question is how strong a right to privacy should there be”

    Your assumption appears to be ‘none’ other than, weirdly, if people want to copnceal that a member of the familiy is disabled. So publish and be damned Sir.

    “Dubs lists his main home as a cottage in the Lake District in Cumbria which enabled him to claim over £26,000 of overnight subsistence in 2007/8 although he has lived in Notting Hill, west London, since 1964. He argued in justification in May 2009 that Lords regard the overnight allowance as a payment in lieu of salary. “We are the only legislators in the world that don’t get paid,” he said.”

    From wikipedia.

  • Mark Cannon

    Lord Dubs of Cumbria’s suggestion might appeal to some, but it is ill-conceived.  Apart from the question of privacy (the Human Rights Act would inevitably be infringed), there is the usual conflation of tax avoidance and tax evasion.  The former is perfectly legal.  The latter is not.

    A simple example of tax avoidance is paying into a pension fund.  There is relief against income tax on such payments (up to certain levels).  It is, of course, utterly shameful that people take advantage of this “loophole” to avoid paying the maximum possible tax!

    Other examples of tax avoidance include various forms of investment which the government of the day is keen to encourage.  Under the much-missed Mr Gordon Brown these included (I think), investing in film finance, IT and development areas.  Those who succumb to the temptation to make such investments and so reduce their tax bills are immoral.  Their homes should be occupied by hordes of anti-capitalist idealists and their children put into care.  They should be named and shamed.

    Or, Lord Dubs should grow up and stop playing to the gallery.

  • Anonymous

    I would love to see how little tax Tony Blair pays..

    • http://twitter.com/Newsbot9 Newsbot9

      We can’t even make UK companies pay UK tax. HMRC is useless. And you want them to botch up more?

      Let’s start with hiring some experts from the IRS…

  • http://www.facebook.com/christhegoth Chris ‘thegoth’ Wilcox

    This is a ridiculous idea.  It’s lynchmob mentality.

    Employ more Tax-men, and force the issue that if you earn the cash in this country you pay the tax in this country.  That’ll sort it.

    It won’t matter where you live in the world.  If you take a wage from a UK Company you will have to pay UK Taxes.  That’ll stop the dodgers in their tracks.

  • http://www.facebook.com/christhegoth Chris ‘thegoth’ Wilcox

    Because if the State is too small the Ill & Infirm suffer terribly and will be left to die.

    There’s a point where people have to pay Taxes.  And they have to pay a high enough amount.  The Torys have been chasing the ‘Small State’ Holy Grail for years, and it still remains as elusive as ever.  All those Torys succeeded in doing was undermining The NHS, and leaving many a vulnerable adult on the scrap heap.

    Which is an incredibly cruel and inhumane thing to do.  Especially on the mass scale Maggie et al did it on.

    However…

    Making The State as efficient as possible is well worth doing.  Keeping that wastage to a minimum is vital.  The State already does a pretty good job there, but it was not perfect.  Ed Balls has recently said that efficiency is needed now more than ever in The State.  And Gordon Brown started making these noises in 2009-ish.

    The Torys are simply cutting.  Their solutions offered so far are mostly ‘let the market sort it out’.  And seeing as there has not been a successful privatisation yet  I don’t see how privatising more will solve anything.

  • http://getlabourout.wordpress.com/ GBN

    “But make no mistake; the rich would fight tooth and nail against having to reveal their earnings and the tax they pay.”Not just the rich. Why do I want everyone knowing how much (or little) I earn? Tell you what, try a pilot out with Lord Dubs and the Fabians first.

    If this is the sort of idea a “Labour Think Tank” comes up I suggest they will be out or government for a few generations!

  • http://twitter.com/robertsjonathan Jonathan Roberts

    Why not publish people’s diaries too? So we REALLY know what our neighbours think of us.

    There is a long-held piece of social etiquette.  You don’t ask how much someone earns.  I have no idea how much my friends and neighbours earn and don’t want to know. 

    Indeed, as a stranger to  me Lord Dubs, you have no right to know how much money I earn (which would be easily calculable from my tax return).  My salary is a private contract between me and my employer. 

    The idea that such information should be publicly accessible to all is a disgusting attack on our freedoms.  I should imagine that whether you are a low paid worker or a middle income earner (which constitutes the vast majority of the workforce), having their personal details in the public domain would be a source of great upset.

    Anyway, won’t say any more. Thankfully, this idea will never come into being.

  • http://tangentreality.blogspot.com/ tangentreality

    What I earn, and the proportion of it that the thieving taxman deprives me of, is no business of anyone else’s.

  • Anonymous

    I’m not sure where to begin with this. This is without doubt, the most stupid thing I’ve read on here. I don’t want my next-door neighbour Googling my income thank you very much!

    Imagine the firestorm that would (justifiably) break out had someone suggested something equally insane for those claiming benefits.  

    “The only serious objection that might be put forward is privacy.” – And that objection is so serious that it overrides anything else.

  • Anonymous

    I couldn’t agree with the full disclosure of all individual tax returns.
    A compromise would be for limited company accounts to provide full disclosure of their business activities, particularly directors pay and tax payments made and their tax returns.
    Currently most companies provide very little public information on their trading activites. Indiviuals who benefit from limited company status should provide more information whilst sole traders could remain private.

  • http://twitter.com/Mr_Roshan Mr Roshan

    Great idea. Whilst on the question of assets, why don’t we all walk around naked so we can see what biological assets we all have too. I mean, they can already see us naked on the body scanners when we go throught the airport.

  • Tom Poynton

    “When the money runs out”… it means we’ve just had a Labour government.

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