The Staggers

The New Statesman’s rolling politics blog

Rather than "shaming" tax avoiders, the coalition should stop them

The latest "crackdown" on tax avoidance is nothing of the sort.

By George Eaton Published 23 July 2012 9:03

Jimmy Carr was recently criticised for tax avoidance. Photograph: Getty Images.

Jimmy Carr recently said he made a "terrible error of judgment" in using a tax avoidance scheme. Photograph: Getty Images.

In these austere times, tax avoidance, as Ken Livingstone and Jimmy Carr learned to their cost, is a toxic practice. In view of this, the government is preparing to announce a new "crackdown" on avoiders today. Treasury minister David Gauke will tell Policy Exchange that scheme operators may be forced to hand over client lists to inspectors, and will be "named and shamed" for not sticking to the rules.

Gauke will say:

We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill.

These schemes damage our ability to fund public services and provide support to those who need it.

They harm businesses by distorting competition. They damage public confidence.

And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.

Laudable words, you may think. But Gauke's suggestion that "naming and shaming" tax avoiders will reduce the practice is either extremely optimistic or extremely disingenuous. Were negative publicity enough to dissuade avoidance, men like Philip Green, hired by the government to advise on its spending cuts (the need them for them partly derived from his and others' avoidance) would have paid up long ago. Rather than merely "shaming" avoiders, the government needs to stop them. Yet there is nothing in today's announcement to suggest it will do so.

As Richard Murphy noted on The Staggers last month, the coalition's much-vaunted "anti-avoidance rule" will do little to end the cat-and-mouse game between HM Revenue and avoiders. As the government closes one scheme, another opens. Only an anti-avoidance principle, which looks at intent as well as practice, would significantly reduce avoidance. As Murphy explained:

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.

On this point, George Osborne, who memorably described tax avoidance as "morally repugnant", and his Treasury colleagues remain mute.

Finally, one might ask why, if the coalition is so opposed to avoidance, its Budget rewarded it. The stated reason for the abolition of the 50p tax rate was that high-earners were avoiding it. As Osborne stated in the Budget:

HMRC find that an astonishing £16 billion of income was deliberately shifted [emphasis mine] into the previous tax year - at a cost to the taxpayer of £1 billion, something that the previous Government's figures made no allowance for.

But this was an argument for reducing tax avoidance, not for cutting taxes for the one per cent. While the rich avoided the 50p rate in the first year of its existence (by bringing forward income from 2010/11 to 2009/10 in order to pay the 40p rate), this was not a trick they could have repeated. Yet Osborne cut the rate all the same. It was as if he had rewarded welfare cheats by increasing their benefits. Seen in this light, the government's new fondness for moralising against avoiders is merely an attempt to change the subject. We should ensure it cannot.

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Tags: George Osborne Tax

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26 comments

Tue, 2012-07-24 08:17 — Junior

...But don't worry, be happy...
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Tue, 2012-07-24 07:45 — bill23 (not verified)

And we should stop paying council tax until the $21 trillion is recovered, because local government is where the corruption starts, and it goes all the way up. In Lyme Regis the town clerk spends most of his time trying to cover up corruption and planning backhanders. But even in the honest councils - Cumbria for instance - these people are in reality low life thieves, as they take your money and do bugger all. I say your money as my mother on her death bed made me promise not to pay these "illegitimate children".
If we don't stop paying their tax in order to force the governments hand, nothing will change. Don't forget these parasites are making multiples of what they could achieve in the real world, and will have to be pushed.
England simple cannot afford to support this **** any longer.

Tue, 2012-07-24 16:58 — wantaminute (not verified)

Everyone avoiding paying tax, but as a way to stop people avoiding paying tax!? Its just crazy enough to work!.......but probably not.

Tue, 2012-07-24 01:12 — Posh Tosh (not verified)

Most tax was enabled to pay for the cost of the First World war - will someone tell Osborne that the war ended in 1918.

Have a good friend with daughter that came from the Ukraine to work here to support her daughter and herself, she went back as did not have the tax advantage of Parliamentary workers and she was not functional enough to come here and sign on for benefit as an unemployable essential worker. She could not speak French or African and was doomed to exist lesser for working with employment.

Why is our Country the first call in Europe for French speakers that have never lived in France? They did not like Calais of course, as the French did not want them a drain on their system!

Tue, 2012-07-24 01:03 — Posh Tosh (not verified)

Osborne drinks with a well known oldest actor in Constipation street, the one that went bankrupt after a Court case to save a million or two!

Both employ the same tax avoidance agencies!

The same lack of culpability too!

Mon, 2012-07-23 22:05 — Pune Escorts (not verified)

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Mon, 2012-07-23 21:29 — Elmerivt (not verified)

my co-worker's mother makes $67 hourly on the laptop. She has been fired from work for seven months but last month her pay check was $14552 just working on the laptop for a few hours. Here's the site to read more Lazycash24 dot com

Mon, 2012-07-23 21:19 — Graeme Hancocks (not verified)

Don't' expect any action from Osborne - just words and sound bites!

Mon, 2012-07-23 20:57 — Simon Gothard (not verified)

The current situation re tax AVOIDANCE seems a bit like cart before the horse. When we can get to a position where all and any taxes collected are spent wisely without a penny of waste then we can start ostracising tax avoiders. Why would you want your hard earned money being pi$$ed up the wall on vanity projects and waste. I wouldn't have any problem wasting my own income but what right has the state to take money from the fruit of my labour under threat of imprisonment and waste it?

Mon, 2012-07-23 20:05 — BluePorcupine

Gah just lost a long comment. Look, I remember saying EXACTLY THIS at the time of the student protests, which very foolishly focussed on getting jolly cross and calling Green a naughty boy rather than lobbying for a change in the law. This was always going to be a legal rather than moral question in the last analysis and by only realising this belatedly the left have played into the coalition's hands as per bloody usual. There is STILL no coherent call for a tax reform programme from the left.

Anthony (Little Englander and Proud)'s picture

Mon, 2012-07-23 18:35 — Anthony (Little Englander and Proud) (not verified)

There is nothing immoral with tax avoidance , what is immoral is the tax itself , especially when it goes to a bloated and wasteful state !

Mon, 2012-07-23 17:46 — mikikiki (not verified)

Hello people, whats goin on here, what to do to live well lofter

Mon, 2012-07-23 13:53 — BagLady (not verified)

We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill.

I see you put an hardworking couple of market traders in prison this week for a bit of tax 'reduction'. Is this what you mean about making life difficult?

Mon, 2012-07-23 12:30 — Dave Crouch (not verified)

I can't believe some of the tripe that I have just read in this article. Firstly, let's put one item to bed; Philip Greene pays all the UK income tax that he is required to pay, no more no less, rather like George Eaton I imagine. It is Mrs. Greene who doesn't pay UK income tax, but then why should she, she is a resident of Monaco. Is it suggested that residents of Monaco pay UK income tax; what all of them, or just the ones that we don't like? It's an interesting concept; what about the residents of Switzerland or Germany, France? Maybe we should introduce a rule whereby all foreigners from whatever country, as well as paying tax in their own countries should make a contribution to the UK exchequer. Perhaps we can introduce it at the next general assembly of the United Nations.
The idea of a government minister pontificating about people taking perfectly legal steps to minimize the tax that they pay is beyond parody. I am sure that you will all recall that just a few short years ago, our current Chancellor of the Exchequer was found to have told the revenue that the house that he had for years been calling his main residence was not his main residence at all. His main residence was a completely different house which he was about to sell and upon which he would make a considerable profit. This little wheeze saved him £55,000 in capital gains tax. And this is a man who's not short of a bob or two.
Of course he's not the only guilty one; "Yes Balls, I'm talking about you, I can see you, don't try hiding behind your missus; she should have received a diploma in creative writing for those expenses forms she filled out."
The answer is to make the tax laws simple, understandable to your everyday idiot in the street and enforce them to the letter. I am currently living in Greece where the tax laws are so incredibly complex it's easier just not to pay tax rather than try to understand them, and you can see where that has got Greece.

Mon, 2012-07-23 12:58 — Herbert (not verified)

Can I just get this straight - the reason the wealthy in Greece don't pay their tax is because the regulations are so complex? Nothing to do with the fact that they are sponging parasites who don't want to contribute to the social good? Simplify the regulations and they'll start paying? Please, don't make me laugh.

Mon, 2012-07-23 13:31 — Dave Crouch (not verified)

You have it exactly right; we don't pay our taxes because it is easier not to. The idea of posting your tax form to the revenue is an unheard of concept here; you are required to either hand it over yourself or get your accountant to hand it over. As my local tax office (of which there are thousands) is not on the same island as my villa, my accountant will take it together with the returns of a whole bunch of other miscreants and remission men all pleading poverty.
The government recently came up with a cunning stunt to try to weasle some tax out of us by introducing a special property tax which was added to everyone's electricity bill. The idea was that it would be impossible to avoid paying this tax; that was until the courts determined that it would be unconstitutional to cut off people's electricity for non payment of the tax. Of course a lot of wily Greeks didn't pay their electricity bill either and now the national power company is in the doo doo.
And so it goes on. All I can say to Angela Merkel is; "Give us yer f*cking money".

Mon, 2012-07-23 11:09 — swatantra

'name and shame' is always the best Policy; you'll find that avoiders very quickly start putting their tax affairs in order. It could even extend to Council Tax dodgers who don't pay their fair share. We might even get a 100% return.

Mon, 2012-07-23 11:43 — Dark Heart of Toryland (not verified)

The idea that 'shaming' tax avoiders will force them to cough up relies on the demonstrably overly-optimistic assumption that tax avoiders have any shame. As the article suggests, if they were capable of shame, they wouldn't be avoiding taxes in the first place.

Mon, 2012-07-23 14:50 — swatantra

Thats because very few know about it; the secret is kept between avoiders and HMRC. Incidently I did my Self Assesment in Dec last year and 6 months later I get an acknowledgement from HMRC for my cheque. Is this a record?

Mon, 2012-07-23 10:48 — New mimos (not verified)

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Mon, 2012-07-23 10:48 — New mimos (not verified)

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Mon, 2012-07-23 10:38 — Hu Ru (not verified)

Stop deluding yourselves. We're all at it. The only reason we have mass immigration is to pay for the presumed pensions of the 'righteous'. Lets stop kidding. Abolish tax altogether......along with the state apparatus, police, teachers NHS, Army etc.....the logical conclusion of us ALL avoiding it.
Old adage.....'you can't have your cake and eat it'
Focus your minds, or as Dave would say.......get over it you 'mumbling idiots'

Mon, 2012-07-23 10:14 — Briar (not verified)

If these people were capable of feeling shame about their greedy financial shenanigans, they would not be avoiding paying tax in the first place. Making a lot of money would not be their primary goal in life. As it is they, and a substantial proportion of the media and public, will proclaim such self interested dishonesty "natural" and one of the reasons why capitalism works.

Mon, 2012-07-23 09:40 — Shinsei67

Surely you should be criticising Darling for announcing the 50p rate but with a delay so that people could bring forward income.

Every high earning Tom, Dick & Harry with variable income could see that it made sense to declare all income immediately and pay 40p rather than pay 50p (or even more, or 45p) in the future.

That was £16bn of tax lost for good.

I'm really at a loss to know what this has to do with tax decisions Osborne is currently making. The 45p rate for 2013 will probably mean that some income will be held over from 2012 (at 50p) and declared in 2013, but the Treasury evidently thinks this is compensated for by the positive effect a lower tax rate will have on inward investment in the UK.

Mon, 2012-07-23 09:10 — Livers (not verified)

"Stop avoiding tax or we'll get really, really cross and turn a blind eye. But don't worry, we're up to our necks in these scams too so they'll never go away. Pass the Bolly.."

When will the Cabinet ministers publish their tax affairs? I thought Cameron was relaxed about this?

Or did he see the data and shit himself?