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

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

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.

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

George Eaton is political editor of the New Statesman.

Photo: Getty
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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.