It’s time for Labour to shift the focus onto radical tax reform

This has been a terrible week for David Cameron and the Tories. His prevarication over his own tax arrangements have left him looking shifty and untrustworthy. The Panama Leaks have implicated over 100 politicians across the world, including around a dozen current and former heads of state, and so people have been asking reasonable questions of their political leaders about potential conflicts of interest and their own political convictions on the issues thrown up by tax arrangements of the global super-rich.

The debate about tax havens is one that is, essentially, about fairness, openness and transparency, but the Prime Minister’s resistance to openness and transparency about his tax affairs has left his reputation in tatters. A YouGov poll reveals that 57 per cent of the public trust him less than they did a week ago.

In spite of a week of bad headlines and accusations of hypocrisy, Cameron isn’t about to surrender the keys to Number 10. It’s time for Labour to shift the focus onto the thorny issue of tax reform – domestically and internationally – to restore some basic fairness to our system of taxation.

The Panama Leaks have thrown open the murky world of the tax arrangements of the world’s super-rich. Many of these arrangements are designed to minimise the tax liability of wealthy individuals and corporations. This is known as tax avoidance, which unlike tax evasion, is perfectly legal. Then there are those who seek to escape paying taxes by lying or cheating their way out of their liabilities all together. This is tax evasion and is illegal.

Many people argue that, whatever the legal distinction, there is an immorality to both tax avoidance and tax evasion. Awkwardly, David Cameron is among those who’ve made this argument and both the Prime Minister and the Chancellor have spoken in forthright terms about the need to clamp down on aggressive tax avoidance as well as tax evasion. This week has given the impression that they don’t really meant it. Talk is usually cheap, but in the case of Cameron and Osborne their inability to put their words into action is costing the UK vast sums of money.

There is a need for a wide ranging review of the UK’s taxation system. We shouldn’t take any lecture from the Tories about our record on tax. The last Labour government got stuck into tax reform and the measures we put into place will raise ten times as much over four years of this Parliament than all of the measures put in place by Cameron’s governments. But we shouldn’t pretend these are easy issues to solve, either. Even well-intentioned Tory-led measures like the Diverted Profits Tax have fallen short; it was nicknamed the ‘Google Tax’ because it was designed to make sure that multinationals like Google paid more tax in the UK, although it turns out that Google won’t be hit by it! That’s why Caroline Flint has been leading the charge for greater transparency through her Multinationals Transparency Bill.

The House of Commons Treasury Select Committee has launched a wide-ranging inquiry on the ‘shifting sands’ of the UK’s tax system, including our shrinking tax base. There needs to be a cross-party effort to look at the type of activity we want to incentivise and discourage within our tax system and, crucially, how our tax system can make sure that everyone pays their fair share. As part of the effort to simplify our tax system we should be looking at the complicated array of tax breaks and asking whether their aims are still relevant and being achieved.

We also need to tackle these issues internationally. There’s a reason why people want to put their money into tax havens like Panama. Panama has one of the most secretive regimes for individuals and corporations in the world. Currency controls are virtually non-existent. This makes tax havens attractive to a range of activities ranging from elaborate, but legal, tax avoidance schemes to outright corruption. Britain’s hands aren’t entirely clean. Among the so-called ‘treasure islands’ of tax havens are a number of British Overseas Territories and Crown Dependencies. That’s why I’ve been arguing that David Cameron needs to put the issue of tax havens on the agenda of his anti-corruption summit next month. We also need to look seriously at direct intervention from the UK’s Parliament to make sure that UK Overseas Territories and Crown Dependencies get their house in order after years of inaction and indifference to polite requests from the UK.

Those who believe that public anger is motivated by envy fundamentally misunderstand the mood of the nation. British people have a basic belief in fair play. It’s not high earnings that people resent, it is that too many high earners and corporations get to effectively determine their marginal tax rate when the majority of us do not. It’s time to grapple with the complexity of our tax system to build confidence that we’re all paying our fair share.

Wes Streeting is MP for Ilford North