Labour slams government for “dragging its feet” in fight against tax avoidance

Labour has accused the government of “dragging its feet” over introducing previously promised measures to clamp down on tax avoidance and stressed that everyone should “play by the rules and pay their fair share of tax”.

In a letter sent by shadow minister James Murray today, following parliamentary questions on the issue earlier this week, Labour has highlighted that the government promised in the budget in March to bring forward new legislation.

Despite this, and plans to announce measures in the subsequently scrapped Autumn budget, minister Jesse Norman refused to answer questions on the issue in the Commons and only said the government would make announcements “shortly”.

Labour’s James Murray said: “The government promised to crack down on promoters of tax avoidance this year – but now all their pledges have been dropped from 2020, with no guarantee of when we’ll see them return.”

The government initially drafted legislation to tackle the promoters of tax avoidance in July for the finance bill 2020-21, but this was subsequently delayed until next year with the content subject to confirmation in the next budget.

The new shadow financial secretary to the Treasury, who recently replaced Dan Carden in the post, added: “It’s irresponsible for the government to keep dragging its feet on such a key issue.

“Everyone should play by the rules and pay their fair share of tax. The fact this Chancellor is pushing ahead with a key worker pay freeze while going soft on tax avoidance makes you wonder about his priorities.”

In the letter sent to the minister today, Labour has asked for confirmation as to whether the draft anti-avoidance legislation published in July for this year’s finance bill would be included in next year’s instead.

The shadow financial secretary to the Treasury also asked the government minister to outline what and when draft legislation of further measures will be published and in which bill they will be included.

Murray asked the minister on Tuesday: “Following the loan charge review, the government promised in March that this year would bring both legislation and the announcement of additional policy measures against those who promote tax avoidance schemes.

“As neither has happened, will the minister confirm when the promised changes will become law?”

In response, financial secretary to the Treasury Jesse Norman simply told colleagues: “We will be making an announcement about the response to the Sir Amyas Morse’s [loan charge] review shortly.”

The government commissioned Morse to lead an independent review into the loan charge. The loan charge is an anti-avoidance measure introduced in 2016 to address the tax loss to the exchequer from a variety of ‘disguised remuneration’ schemes.

Below is the full text of the letter sent to Tory minister Jesse Norman.

Dear Jesse,

I am writing, further to my question to you in the House of Commons on 1 December, about my concerns that the government is delaying much-needed action to tackle the promoters of tax avoidance.

At the budget on 11 March, the government announced initial steps it would be taking to tackle the promoters of tax avoidance, and the necessary legislation was published in draft on 21 July. This was intended to be part of the Finance bill 2020-21, though of course that bill has now been delayed. It now seems uncertain whether the legislation will be included in the Finance bill 2021, with the government making clear the contents of that bill will be subject to confirmation at budget 2021.

Furthermore, a government strategy on tackling promoters of tax avoidance published on 19 March promised that further measures, beyond those published in July, would be announced at Autumn budget this year.

However, with the Autumn budget now cancelled, you confirmed in a written ministerial statement on 12 November that these proposals will now not be published this year. Instead, your statement suggests their detail will be set out and consulted on sometime next year, and you give no indication of when the subsequent legislation might be enacted.

I would therefore be grateful if you could confirm:

1. Whether the draft anti-avoidance legislation published on 21 July 2020 will form part of the Finance bill 2021?
2. When the further measures to tackle promoters of tax avoidance first promised in ‘Tackling promoters of mass-marketed tax avoidance schemes’ (published 19 March 2020), and referred to again in your Written Ministerial Statement of 12 November 2020, will be published in full and consulted on?
3. When you expected the draft legislation on these further measures will be published, and through which bill you expect the necessary legislation to become law?

When I raised these points with you in the House of Commons on 1 December, you did not respond in full, but rather promised the government would be making a further announcement ‘shortly’. I would however, welcome your response to the specific points above ahead of that further announcement, or alternatively your commitment to a date by which a further announcement will be made and a guarantee that this will include specific answers to the points above.

The delays in implementing legislation around the promoters of tax avoidance worryingly echo the government’s delay in reforming the law over corporate liability for economic crime. In that case, the government first said it would look into corporate liability in 2014, then taking until 2017 to issue a call for evidence, and a further three years to respond.

In its response to the call for evidence on corporate liability, published earlier this month, the government asked the Law Commission to produce an options report. This means there will be no realistic prospect of law reform before 2023 at the very earliest: nearly a decade since the matter was first raised.

People in this country expect everyone to play fair and pay the tax they should. They want the government to act, without delay, against those who promote tax avoidance schemes, and who routinely mislead otherwise law-abiding taxpayers.

I am concerned the government’s delay means people may be left at risk of serious personal financial difficulty, and means the public finances may continue to miss out on billions of pounds a year. I would therefore be grateful for your response to my above questions about the implementation of measures on this important matter.

Yours sincerely,

James