Labour plans tough new penalties to crack down on tax avoiders

Following Ed Miliband’s speech earlier today, Ed Balls has announced that Labour would introduce new penalties. through the General Anti-Abuse Rule (GAAR), for people found dodging their taxes.

Writing on his blog, Ball said that these fines could be 100% of the value of the tax which was avoided, explaining:

“For the first time this will provide a tough and genuine deterrent to those who try to abuse the system and avoid paying their fair share of tax.”

That means those who avoid tax could now be forced to pay up to twice as much as their original tax bill if they’re caught, rather than the current system where those caught under the GAAR are only forced to repay the tax they originally owed. That means at present there is no disincentive for those trying to deliberately avoid tax, because the worst case scenario is simply to pay the tax they’ve avoided.

Much in line with the tone of Miliband’s speech earlier today, Balls writes:

“At the moment, we are going in the wrong direction. The amount of uncollected tax – the so called ‘tax gap’ – rose again to £34 billion in the latest year on HMRC’s own estimates. It’s up by £3 billion under this government and tax campaigners have suggested the true figure could be much higher.”

Balls also goes on to note that cracking down on tax avoiders is also about global reforms, so that multi-nationals are main to pay their taxes “where their activity takes place”. These measure are in addition to those outlined at Labour conference this year as a means of funding an NHS “Time To Care” fund.