Rachel Reeves has said an incoming Labour government would launch a £5bn crackdown on tax avoiders to close a gap in its spending plans exposed by Jeremy Hunt scrapping the non-dom regime to finance tax cuts.
That is, of course, simply a £5 billion rise in taxes. Because avoidance is the entirely and wholly legal process of organising your affairs according to the tax law. Changing those rules will indeed change how much tax is paid. But it’s a tax rise all the same. Because avoidance is that legal thing, therefore to change the rules so that it cannot be done is to raise taxes.
Yes but no. HMRC and the grasping state have redefined tax avoidance as using the opportunities available in a way that they didn’t intend. As the grasping state is judge, jury, etc they get to take what they want unless it is explicit they cannot.
You are thinking pre-Blair and pre-introduction of Napoleonic law approaches in the UK
£5bn? Whatevs. Pointless tinkering to make it look like they have policies, when actually they will continue the suicidal flailing of the Useless Party.
If they claim this measure will raise £5bn you can be certain the actual revenue raised will be nowhere near that. In any case, it’s the square root of fuck all in the context of the £1.2 trillion spaffed each year by the state.
“Rachel Reeves has said an incoming Labour government would launch a £5bn crackdown on tax avoiders”
At which point we should all remember IR35
“The initial regulatory impact assessment for IR35 in 1999 stated that HMRC expected the measure to generate £220 million per year in National Insurance contributions and a further £80 million in income tax.”
But
“In May 2009 the Professional Contractors Group received a reply to a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 had in fact raised for the exchequer. The FOI reply revealed that in the tax years 2002/03 to 2007/08, IR35 directly raised just £9.2 million. This equates to an average of around only £1.5 million per tax year, less than 1% of the expected amount. It is not clear whether this includes the NI contribution, or is just income tax…No figures were given for the cost of administrating the tax, or the cost of the investigations.”
These crack downs on tax evasion rarely net too much additional income. Egregious tax evasion on the part of individuals or companies really isn’t that common, though we do see the occasional case brought before the court. The tax authorities (at least here in OZ) tend to prefer to stand over the softer targets, like small businesses, because they’re more likely to win.
Andrew C
I would agree completely, except that that probably doesn’t account for some quite likely deterrent effect. There will have been many (risk averse) that simply didn’t want to test that water but who – in the absence of IR35 – might otherwise have seen no down-side to taking the corporate route.
However, the opportunity cost for all the wasted time spent complying with / avoiding / considering the issue? I suspect that dwarfs the £220 million, and some…
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”.
Lord Clyde – Ayrshire Pullman Motor Services v Inland Revenue [1929]
Every chancellor thinks (or at least says, one suspects they don’t actually believe it) that they can raise ‘free’ money by reducing tax evasion. Its like pretending you’ve read A Brief History of Time to look windswept and more interesting. Everyone knows its a lie, but no-one can call you on it because no-one else has read it either.
Every time I window shop to find the best price for whatever, I avoid some VAT. So maybe she’s planning to reinvent Purchase Tax?
I’ve read A Brief History Of Time, it’s really not that hard to understand though I did get a bit out of my depth towards the end. Hawking did a really good job of explaining quite difficult concepts to the ordinary plebs like me.
I was aided, considerably, by having met most of the ideas before. Jerry Pournelle (??) “Do fuzzy black holes have hair?” Which was, largely, based upon Hawking.
I understood it well enough to disagree with it, in parts. So it can’t be that hard.