Tackling tax evasion and avoidance
Tackling tax avoidance and evasion
A Conservative government will raise at least £6 billion a year by the end of the Parliament by cracking down on aggressive tax avoidance and evasion, improving tax compliance and closing the tax gap.
Sticking to the plan:
In the last year, inflation has fallen from 11.1 per cent to 2.3 per cent, the economy is growing and we are cutting taxes for 29 million working people.
If we want to continue with our clear plan
and bold action to cut taxes, it is vital that people and businesses pay the taxes they owe.
Under the last Labour government, the tax gap (the difference between taxes owed and taxes actually collected) was far too high. Since 2010, we have introduced 200 measures to tackle the tax gap which has already achieved significant progress, and we are taking further bold action to raise at least £6 billion a year more by the end of the next Parliament from continuing to crack down on tax avoidance and evasion.
Only Rishi Sunak and the Conservatives have a clear plan and will take the bold action needed to crack down on tax avoidance, strengthen the economy to deliver quality public services, and cut taxes, securing a brighter future for families and businesses across the country.
We are doing this by
• Raising at least an additional £6 billion a year by the end of the next Parliament, by clamping down on tax avoidance and evasion.
We will do this by hiring additional HMRC staff to boost compliance, investing in labour-saving technology such as artificial intelligence so that HMRC staff can spend less time on paperwork and administration and more time enforcing the law, and targeting specific problem issues like umbrella companies and regulation of the tax advice market and registration of agents.
• Since 2010 we have introduced over 200 measures, including 40 since 2021, to tackle tax non-compliance. In total, the Office for Budget Responsibility has scored these measures as raising £95 billion across the forecast, e.g. £6.7 billion for each year we’ve have been in government.
• Returning the tax compliance yield to pre-pandemic levels.
Following the enormous pressure put on HMRC during the pandemic to deliver our financial support schemes, we will boost the effectiveness of HMRC’s compliance and enforcement activities to pre-pandemic levels.
• Taking a prudent approach with our costings.
According to the head of the National Audit Office, the government could raise an additional £6 billion a year by cracking down on fraud, error and tax evasion.
This continues with our proven record, with the OBR scoring £94.8 billion of revenue raisers through Tackling the Tax Gap measures at fiscal events since 2010, averaging £6.7 billion for each of the 14 years.
Comments
Tax evasion is illegal, tax avoidance is pretty much a duty. Tax avoidance is only an option because the tax system is so overly complicated. If the system was much simpler so people could see at a glance how much tax the government is demanding there would be less scope to avoid tax.
Governments often deliberately apply a lower, or zero, tax rate to activities they wish to encourage - for example, the UK government has now exempted 100% of the profits which a company reinvests in the business from Corporation tax.
If a taxpayer or company does something which is exactly in line with the spirit and letter of what this lower tax rate was designed to encourage, such as a company which takes part of its' profits and invests it in more and better plant and equipment, that is legitimate tax avoidance and is not unethical, illegal or harmful.
Aggressive tax avoidance is exploiting loopholes to do something which is against, rather than in line with, the spirit of what the tax regime was meant to encourage.
There is no easy answer to this.
However, avoiding tax is not usually the main reason companies do this, it isn't usually a form of tax avoidance. It's most often done to raise the company's earnings per share by spreading the same total earnings over fewer shares.
There's a good article on the subject which includes why share buybacks may be a good or a bad thing at
https://www.bankrate.com/investing/stock-buybacks/
Personally I think the present chancellor was right to make other forms of genuine investment more profitable and tax efficient, e.g. by making permanent a 100% offset against corporation tax of profits which really are invested in the business.
Companies which respond to that kind of incentive by investing more in plant and machinery or the operations of the business provide a classic example of when what is technically "tax avoidance" means doing exactly what the government was trying to encourage and is neither harmful or dishonest.