Peter Dowd: The Tories’ response to tax scams is to choke off the funding to HMRC

18th April, 2017 8:33 am

Taxes are the price we pay for a civilised and fair society. Yet the burden of taxation is increasingly falling on the middle and working class, whilst the super-rich and wealthy elite are finding new ways to avoid paying their fair share in tax. According to HMRC tax avoidance and tax evasion costs the Government £36bn a year. That is £36bn that could be spent on our national health service, our schools and on local infrastructure. That’s money that could solve the social care crisis which is seeing 900 adult social care workers in England quit a day or that could prevent the £3 billion spending cuts to school budgets that are planned between now and 2020. Instead it remains uncollected.

The government’s record on tax avoidance has been scandalously poor, despite having countless opportunities in the last few years to act. The Commons public accounts committee has recently conducted a number of inquiries into transnational corporations using tax avoidance measures and yet the government has not initiated any test cases. On the contrary, they have offered the likes of Google a sweetheart deal for taxes owed dating back as far as 2005. The HSBC leaks, which showed HSBC actively helping wealthy clients avoid paying tax in the UK, has led to only one prosecution out of a possible 3,600 cases. Similarly the Panama Papers, the largest leak of tax-avoiders, has produced no action from the government.

On the few occasions UK courts have declared some tax avoidance schemes unlawful, the rulings have not been followed by any government-led investigation of the banks, accountancy firms, or law firms who are peddling the schemes in the first place. Similarly when HMRC does win court cases against tax avoiders they never seek to recover costs, leaving the tax payer out of pocket. It is clear that the government has little desire to stop tax avoidance.

This is ultimately a battle between the multinational corporations and individuals who annually spend hundreds of millions on accountancy fees. Meanwhile the government ties the hands of HMRC by not providing the necessary resources or capacity for it to properly tackle tax avoidance or evasion. The planned cut of £180m to HMRC’s budget by 2021/22 is a stark example of the government’s approach to tackling tax avoidance, namely it doesn’t really have one.

Despite the government’s claims, the finance bill does little to tackle the issue of tax avoidance and evasion. There is nothing in the government’s proposals to address the chronic lack of enforcement in the context of the wider regulatory problems. In short, the overall measures in the finance bill do not go far enough in closing tax loopholes and have a number of gaping admissions. It is clear that when it comes to tax avoidance the Tories talk the talk but they are not interested in real action.

Peter Dowd is shadow Chief Secretary to the Treasury and MP for Bootle.

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