Tax avoiders like Jimmy Carr have nothing to fear from Osborne

The Chancellor's plans will allow the vast majority of tax avoidance to continue uninterrupted.

"I regard tax evasion and indeed aggressive tax avoidance as morally repugnant." So said George Osborne in his Budget speech in March.  I hope he meant it. The trouble is he has not evidenced it.

Last week, the government started a consultation on the introduction of what is, in effect, the tax anti-avoidance rule recommended  by Graham Aaranson QC as a result of a review Osborne commissioned in 2010. The government says that this is a general anti-avoidance rule. The trouble is that is precisely what it isn’t.

I can say that with confidence. Aaranson himself said in his report:

I have concluded that introducing a broad spectrum general anti-avoidance rule would not be beneficial for the UK tax system. 

In other words, what Aaranson suggested was not a general anti-avoidance rule. He did instead propose:

[I]ntroducing a moderate rule which does not apply to responsible tax planning, and is instead targeted at abusive arrangements, would be beneficial for the UK tax system.

The trouble is that his plan – now adopted almost wholesale by the government - is intended as a result to only attack what he described as the "most egregious" tax abuse schemes. I met with Aaranson during his review process. What he clearly meant was that his intention was that the vast majority of tax planning should continue uninterrupted. Indeed, he says in his report that a broadly based general anti-avoidance rule

Would carry a real risk of undermining the ability of business and individuals to carry out sensible and responsible tax planning.  Such tax planning is an entirely appropriate response to the complexities of a tax system such as the UK’s. 

May would disagree. He was also worried that such a scheme:

Would also inevitably in practice give discretionary power to HMRC who would effectively become the arbiter of the limits of responsible tax planning. 

To make sure that didn’t happen he wanted representatives of the tax profession – dedicated almost solely to tax avoidance as it is – to decide which schemes were acceptable or not. That’s like putting the foxes in charge of the hen house.

That’s why I doubt that Osborne is committed to tackling tax avoidance. And it is why I have always supported a general anti-avoidance principle in the UK, and not a general anti-avoidance rule. As a tax avoidance specialist said in the Times (£) today:

It’s a game of cat and mouse. The revenue closes one scheme, we find a way round it.

That is what happens when you have a rule. A principle is something quite different. It looks at intent. It is not about box ticking, as rules are (which is why they are so easy to get round - general anti-avoidance rules included). It is about looking at what you did and using that evidence to assess on the balance of probabilities what your intentions were.

So, if, for example, you arranged your affairs so that you provided your services via a series of companies, one of which happened to be in Jersey which lent you back the tax free income it had received so that you appeared to have no legal requirement to pay tax in a way that a more commercially obvious arrangement might have given rise to then it would be reasonable for someone – and I think that someone should be HM Revenue & Customs – to decide you’re tax avoiding. And if that’s what they decide then if we had a general anti-avoidance principle they could say that the scheme was abusive and take the obvious step of simply ignoring all the steps put into the arrangement likely to be solely or mainly included to save tax. They’d then tax the commercial substance of the deal and not the artificial arrangement put in place solely to avoid tax.

Of course any such HMRC ruling would be subject to appeal to the courts, but the taxpayer would have to show why the scheme was not tax avoidance: the burden of proof would be on them.

This changes the way we assess tax in the UK, without doubt, and in a way Aaranson and Osborne clearly do not intend. But even the Times said today in its leader:

The British tax system is unfair. It charges the vast majority of people the basic rate of income tax, and expects them to pay. It asks a minority to pay higher rates of tax, and then invites them to avoid it.

That is true. A general anti-avoidance principle rather than a general anti-avoidance rule would radically change this and would provide the power needed to deliver a fair tax system in the UK. That’s why Michael Meacher MP is tabling a private member’s bill to introduce a general anti-avoidance principle into UK tax law this week.

It’s what the Times wants. It’s what the UK needs. But will Osborne find the moral will to back it?

Comedian Jimmy Carr channels proceeds from DVD sales and television appearances through a Jersey-based company. Photograph: Getty Images.

Richard Murphy is an adviser to the Tax Justice Network and the TUC on taxation and economic issues. He is also the director of Tax Research LLP.

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I believe only Yvette Cooper has the breadth of support to beat Jeremy Corbyn

All the recent polling suggests Andy Burnham is losing more votes than anyone else to Jeremy Corbyn, says Diana Johnson MP.

Tom Blenkinsop MP on the New Statesman website today says he is giving his second preference to Andy Burnham as he thinks that Andy has the best chance of beating Jeremy.

This is on the basis that if Yvette goes out first all her second preferences will swing behind Andy, whereas if Andy goes out first then his second preferences, due to the broad alliance he has created behind his campaign, will all or largely switch to the other male candidate, Jeremy.

Let's take a deep breath and try and think through what will be the effect of preferential voting in the Labour leadership.

First of all, it is very difficult to know how second preferences will switch. From my telephone canvassing there is some rather interesting voting going on, but I don't accept that Tom’s analysis is correct. I have certainly picked up growing support for Yvette in recent weeks.

In fact you can argue the reverse of Tom’s analysis is true – Andy has moved further away from the centre and, as a result, his pitch to those like Tom who are supporting Liz first is now narrower. As a result, Yvette is more likely to pick up those second preferences.

Stats from the Yvette For Labour team show Yvette picking up the majority of second preferences from all candidates – from the Progress wing supporting Liz to the softer left fans of Jeremy – and Andy's supporters too. Their figures show many undecideds opting for Yvette as their first preference, as well as others choosing to switch their first preference to Yvette from one of the other candidates. It's for this reason I still believe only Yvette has the breadth of support to beat Jeremy and then to go on to win in 2020.

It's interesting that Andy has not been willing to make it clear that second preferences should go to Yvette or Liz. Yvette has been very clear that she would encourage second preferences to be for Andy or Liz.

Having watched Andy on Sky's Murnaghan show this morning, he categorically states that Labour will not get beyond first base with the electorate at a general election if we are not economically credible and that fundamentally Jeremy's economic plans do not add up. So, I am unsure why Andy is so unwilling to be clear on second preferences.

All the recent polling suggests Andy is losing more votes than anyone else to Jeremy. He trails fourth in London – where a huge proportion of our electorate is based.

So I would urge Tom to reflect more widely on who is best placed to provide the strongest opposition to the Tories, appeal to the widest group of voters and reach out to the communities we need to win back. I believe that this has to be Yvette.

The Newsnight focus group a few days ago showed that Yvette is best placed to win back those former Labour voters we will need in 2020.

Labour will pay a massive price if we ignore this.

Diana Johnson is the Labour MP for Hull North.