Monday, 30 December 2013

Labour and tax avoidance

Despite the rhetoric, the so-called determination of the coalition to crack down, the disgust with "morally repugnant" tax avoidance schemes, the coalition has done next to nothing to end what Margaret Hodge frequently describes as an "industry", and the net result is a "tax gap" of at least £35bn.(Independent,19/12/13) It is difficult to believe the government wants the "gap" to be reduced, when it has cut thousands of jobs at HMRC, and uses the tax experts from the Big 4 accounting firms to sit in on Treasury committees, as these are the same firms who make millions every year from their tax avoidance "advice". The recent Greene King case highlighted how one of the four, Ernst and Young, agreed to give such advice, provided it took 8% of the amount of tax avoided! The same firm then signed off Greene King`s accounts.
      The government is content to allow corporation tax to be avoided on a massive scale, as long as the businesses stay in Britain, employing people on zero-hours contracts and rarely paying a living wage. Individuals can squirrel money away in British territories like the Cayman Islands, safe in the knowledge that little, if any, tax will need to be paid. A Tory party, largely funded by the City, is unlikely to run the risk of upsetting what is for them a lucrative "apple-cart"! Labour, though, could and should.
        The news that tax-avoiding Google makes millions out of advertising on its sites and is expanding in this area to ensure more adverts are seen, and the fact that many other tax-avoiding companies had very large adverts over the Christmas period on television and in daily newspapers, suggest a possible opening for a political party determined to close the "tax gap". Why not double the VAT rate paid on all advertising, so doubling the price for each advert? The proviso can be inserted that at the end of the financial year, the extra cost will be repaid to the company paying for the advertising, as long as the correct corporation tax has been paid? If any avoidance scams have been used, like registering abroad, or claiming no profits made in Britain, no repayment.
      To show the electorate that it is not, unlike the Tories,in thrall to the City, Labour could show its determination to return an element of fairness to the tax system, and an early announcement could stop the party leaking votes to Ukip. It could even adopt the Democrats` idea from 1930s America, and award stars (Blue Eagles in US) or such like, for paying correct tax, paying living wages to employees, and other civic-minded activities; the stars could then be used by the companies as part of their advertising campaigns, leaving the consumer to decide whether to buy from them, or not. Labour needs to be clear about which side of the City fence it is on, and the adoption of such policies could prove electorally advantageous!

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