Labour announces public enquiry into tax avoidance

Peter Dowd, shadow chief secretary to the Treasury, promised tough action on tax avoidance, and reiterated plans to force high earners to publish their tax returns.

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Peter Dowd, the shadow chief secretary to the treasury, this morning called for international action on tax evasion and avoidance at a New Statesman and CAGE (Competitive Advantage in the Global Economy) fringe event, reiterating Labour’s policy of forcing high earners to publish the amount they pay to HMRC.

Appearing alongside expert speakers from CAGE, the Institute for Government and the Public and Commercial Services Union (PCS), Dowd told conference delegates that once in government the party would launch a public enquiry into tax evasion and avoidance and “open the system up,” obliging “anyone earning more than £1m a year” to “make their tax returns public.”

“We live in a globalised world whether we like it or not,” said Dowd, “so we need to challenge people and companies on that level, on that world scale. It’s difficult with people like Trump, who almost encourages evasion, and doesn’t think it’s a problem.” The American President has been repeatedly accused of avoiding tax and participating in complex schemes to minimise both the inheritance he received from his father and his subsequent income from television and real estate. He has also repeatedly refused to make his tax returns public, the first major American party nominee to do so since 1976. Last year, the then Prime Minister, Theresa May, and the then Chancellor, Philip Hammond, came under pressure from Labour to publish their tax returns. Both Jeremy Corbyn and John McDonnell have published what they’ve paid to HMRC several years running. Earlier this year, Hammond was criticised for his financial interest in a firm which paid an effective tax rate of 0.4 per cent on company profits of £1.6m.

At the event, Professor Arun Advani from CAGE highlighted his work studying the financial benefits of random audits of self-assessment taxpayers, pointing out that over 80 per cent brought in money. “6 per cent of revenue that is supposed to come in never arrives, according to HMRC’s figures,” Advani told the audience, which equates to around £35bn in lost revenue. “1 in 6 pounds amongst self-assessment payers doesn’t come in because one in three self-assessors are under-reporting. We’ve cut the number of audits since the mid-2000s but they’re extremely good value, because there’s a tiny fraction, a small minority of the self-employed who owe a vast majority of the money.” HMRC’s staff and budget have been repeatedly slashed since 2010, and since the financial crisis the UK has applied more cuts to its tax authority than any other European country except Greece.

Cathy Cross, parliamentary officer at the Public and Commercial Services Union, questioned the accuracy of the £35bn figure for revenue lost through evasion, pointing out that the low estimate didn’t include money lost through practices such as offshoring, in which companies take advantage of the low tax regimes of places like Jersey or the Cayman Islands – many of them British Overseas Territories – and channel their profits abroad. Once widespread corporate tax management is taken into account, the lost tax numbers are “closer to £110bn a year,” Cross said. In 2017, Facebook paid £15.8m in corporation tax in the UK, having declared a pre-tax profit of just over £60m on more than £1.3bn in sales, while Amazon paid £4.5m in corporation tax on a turnover of £1.98bn.

“When the Panama Papers came out I went on Newsnight,” Dowd remembered, “someone from the Cayman Islands stock exchange was on. And he said that what the individuals named in the papers had done was completely legal and justified. It was within the law and it was people protecting their private income, and that it was the journalists who’d leaked and reported information from private individuals that should be locked up. This is the attitude and the culture we’re fighting against.”