Loopy Loopholes - Tax Avoidance

Dealing with Tax Avoidance

A lot has been done and there's a lot still to do

2015 is the email election. Hundreds of campaigning organisations are contacting their members, and the general public, and encouraging them to write to their prospective MPs about important issues. This is fantastic for democracy, if hard work for parliamentary candidates. So far, (and at the time of writing there are still weeks to go so a lot could change) the biggest issue is the NHS but coming in as a strong number two is tax avoidance. http://www.actionaid.org.uk/take-action-for-tax-justice

The ideal tax system would be simple, competitive and fair. The vast majority of people and businesses in the UK pay their taxes on time and in full, but there are always some who try to get away without paying their fair share. This is morally wrong and damages our economy and public finances.

The Liberal Democrats have taken dramatic action to reduce tax dodging in this parliament and have important plans to further reduce it if we are still in power after the general election. As a businessperson who spends a large proportion of the company marketing budget with Google, advertising British products to British consumers, and then completing complex "reverse charge" elements of a VAT return which ensure Google pays no VAT in the UK this is an important issue to me personally and I recently raised this matter directly with Liberal Democrat Chief Secretary to the Treasury Danny Alexander. I also have recently had a meeting with James Taylor of the Action Aid Take Action for Tax Justice campaign to discuss this matter and outline my general support for the aims of this campaign.

Danny Alexander has made tackling tax avoidance a top priority and has made progress on many of these issues. Since coming into Government in 2010 he has led a crackdown on tax avoidance and evasion that is closing loopholes and making more people pay up. Liberal Democrats in Government have already made over forty changes to the law to close loopholes and make big strategic changes to the way tax is collected to ensure fewer people slip through the net. The top 1% of earners now contribute 28% of the income tax revenue the government brings in. A much higher percentage than under the last Labour government.

The changes we have made include the introduction of a General Anti-Abuse Rule (GAAR); strengthening the Disclosure of Tax Avoidance Schemes (DOTAS) regime; introducing a tougher monitoring regime and penalties for high-risk promoters of tax avoidance schemes; giving Her Majesty's Revenue and Customs (HMRC) the power to collect disputed tax bills up front (thus removing the incentive for tax avoiders to delay and frustrate HMRC's efforts to settle disputes); and clamping down on Stamp Duty tax avoidance with a new range of measures.

Another big change was to invest almost £1bn in HMRC to tackle tax avoidance, recruiting 2,500 extra members of staff to work on tackling tax avoidance and opening a new Large Business Directorate last year to deal specifically with the tax affairs of the 2,100 largest firms in the UK. Part of their work will be to enforce the new Diverted Profits Tax, which will counter the use of aggressive tax planning methods used by some big firms to divert their profits to areas with very low rates of tax. We hope this tax will yield an extra £1.35bn over the next five years.

A key issue with tax avoidance is linked to international agreements. It is these agreements that let the likes of Google and amazon avoid their fair share of taxes. The coalition government has worked internationally to tackle tax avoidance and that this was one of the main goals of the UK's presidency of the G8 group of nations. During our presidency, we won G8 agreement on transparency on the real owners of businesses, as well as getting the Organisation for Economic Cooperation and Development (OECD) to develop a country-by-country reporting template for multinationals to report profit and tax information. Over 90 countries are signed up to the new International Comprehensive Report Standards, closing down options for tax cheats, while around £2bn in previously unpaid tax has been brought in from our new agreements with Switzerland and Lichtenstein alone.

There is clearly much more to do at home and abroad, but it's good that Liberal Democrats have taken action to close loopholes and force tax cheats to pay more of their fair share. Thanks to the steps we have taken, the tax yield for this year will be around £9bn more than when we came into Government in 2010.

As Lib Dems we strive to create a stronger economy and a fairer society. Tax revenues from a strong economy are essential to build a fairer society and it is important everyone pays their fair share of taxes. Dealing with tax avoidance is essential and if we are in Government again our aim is to make progress on this agenda in every Budget and Autumn Statement of the next Parliament. We will continue to invest in HMRC, as we have done in Government, to enable them to do more to tackle tax evasion and avoidance. We will also introduce a range of other measures, including a General Anti-Avoidance Rule, which goes much further than the current anti-abuse rule. We will seek to extend the requirement for country-by-country reporting from banks and extractive industries to cover all UK listed companies. The majority of these proposals will be introduced through the annual Finance Bill, allowing us to take regular action throughout the Parliament.

And of course, the ultimate way to tax the wealthy, in a way that cannot be avoided, is through their property. A mansion tax has been Lib Dem policy for a long time but blocked by the Conservatives (and now copied by Labour with an inferior version), Rich people cannot hide their houses and land! Clamping down on tax avoidance, ensuring the wealthy pay their fair share and lowering taxes for the lowest paid. These are Lib Dem values in action