Labour announce plans to deal with tax avoidance



Next week, Ed Balls, shadow chancellor of the exchequer, will announce Labour’s plans to tackle tax avoidance and create a fair business tax system.

Balls and Shabana Mahmood MP, Labour’s shadow exchequer secretary to the Treasury, have worked on the plans to take on tax avoidance following a comprehensive consultation process with business-people and other experts.

The plans, which will be unveiled, will include the following:

• Closing loopholes, particularly the “Quoted Eurobond Exemption” that’s estimated to lose the country up to £500 million a year, that allow companies to illegitimately move their profits to tax havens abroad. As part of this, Labour will tabling an amendment to the Finance Bill pressing the government to act on this loophole.
• Making the tax system more transparent so we know who owns firms and how much tax they pay. Under this strand of the policy, Labour will require all UK Overseas Territories and Crown Dependencies to publish the names of beneficial owners of companies.
• Putting a stop to dormant companies by requiring an annual confirmation of dormancy. Currently, dormant companies can be used to avoid filing Corporate Tax returns, this means they can trade for up to five years without paying tax. Labour also plan to look into asking banks to automatically inform HMRC when there is activity in supposedly dormant accounts.
• Strengthening the National Audit Office to scrutinise tax reliefs and find when they are abused to avoid tax.
• Working with ‘developing’ countries to tackle tax avoidance. This will include ensuring such countries, which are often affected by tax avoidance (in particular, through the extraction of natural resources) are part of global talks on tax reforms.
• Finalise proposals to deem construction workers as employed for tax purposes if they meet relevant employment criteria.

Ahead of this speech, Balls has said:

“At a time when working people are facing a cost-of-living crisis and the deficit is high, it’s vital that everyone pays their fair share and we restore public trust in the tax system.

High profile cases of tax avoidance have undermined both public trust in company taxation and also hit businesses who play by the rules and pay their fair share.

The next Labour government will act to tackle tax avoidance including by closing loopholes, increasing transparency and ensuring we have tougher independent scrutiny of the tax system.  

George Osborne is failing to tackle tax avoidance. The most recent figures from HMRC show that the amount of uncollected tax in our economy – the ‘tax gap’ – went up last year. This isn’t good enough, so Labour will make reversing this trend and narrowing the tax gap a priority for HMRC.”