Today George Osborne failed yet another one of the targets that he set himself, this time on borrowing. The Chancellor borrowed £1.8bn more than his target. A target which he claimed, before the election, that Labour would not meet making them irresponsible and putting the economy at risk. This closely follows his missed objective to see the debt/GDP ratio drop in 2015-16, and his overspending of the welfare cap.
The Tories increasingly look like they will miss their target of a surplus by 2020, but despite their best efforts it’s becoming increasingly difficult for the Tories to achieve deficit reduction purely on the backs of the most vulnerable. The attempted £4.6 billion cuts to people with disabilities (through PIP) and £5.37 billion a year from lowest paid workers (through tax credit) have both been faced down by hostile public opposition.
With the current account deficit at £45.7 billion dear George is clearly struggling. So today we have sent him the helpful aid of a calculator and guiding note, to tackle the deficit a fairer way – ending the lip service and instead acting on tax avoidance.
‘Independent experts have put the tax loss from ‘artificial’ tax avoidance schemes – contrived but legal systems aimed primarily at reducing tax bills – at at least £25 billion. It is likely to be a good deal higher. The volume of global wealth held offshore, and thus hidden away from national tax authorities, has been estimated between $7.6 and $21 trillion (between eight and twenty-four per cent of global financial wealth).’ (Lansley and Mack, 2015 pp.238)
Now of course it will be near impossible to recuperate all of the tens of billions that we lose through tax avoidance every year, but there is absolutely no doubt that far more can be done – and if this government was serious about ‘balancing the books’ they would do it.
The first and most glaringly obvious example, HMRC can end its sweetheart deals with those who are known to avoid tax. Vodafone paid £1.25 billion in its deal with HMRC, when it in fact owed over £6 billion in liabilities and interest, and later paid no British taxes on the £84bn sale of its stake in Verizon. Or the Google deal in which the conglomerate paid an effective rate of 3% rather than the 20% that our hardworking small businesses currently have to pay.
In 2014 the National Audit Office revealed that one in five large businesses paid absolutely no corporation tax in Britain in the year previous, and over half paid less than £10 million.
Those of us who cannot afford an Ernest and Young accountant to do such deals for us would not only pay financially, at least in full, we would also pay with a stint behind bars – the legality being the difference between avoidance and evasion. Criminal charges were not the outcome for those facilitating wrongdoing at HSBC, in fact only one of the 3600 individuals involved were prosecuted. Hervé Falciani, however, the man who exposed HSBC’s wrongdoing, received a 5 year sentence for exposing the scandal.
This is brings us to the second approach. HMRC could stop the ‘Big Four’ accountancy firms from having such an easy time facilitating tax avoidance for the mega-wealthy, by no longer asking them to write the tax laws for us.
Most new tax laws will be drafted by an advisor from a leading accountancy firm, the exact individuals who will then advise their clients how to avoid the said taxation. For example a KPMG manager was the lead advisor on the government’s tax relief for patents. Upon implementation he, almost certainly a male, returned to his clients, advertising how to ‘get the most’ out of the new scheme.
KPMG even produced a brochure suggesting that this legislation represents a business opportunity to reduce UK tax and that KPMG ‘can help clients in preparation of defendable expense allocation’ (Public Accounts Committee Report, 2013). This came at a Treasury estimated cost of £1.1 billion (Lansley and Mack, 2015 pp.200).
And of course in light of the Panama Papers, which revealed little that we did not already know, far greater transparency of who actually owns what where is the smallest of gestures that this government must make to end the shadowy tax avoidance that David Cameron has called ‘morally wrong’.
If this government actually cared about deficit reduction more than it did the corporate interests of its friends and itself then it would take serious action. However, this will not be the case. Unfortunately, it will not be the tax avoiders who will pay, it will be the government paying lip service, and the rest of us paying the price.