The estimated amount lost to the people of Britain is as high as £70bn a year. About half the cost of the NHS. If one included the tax dodging-cash economy it could be another £20bn.
We can help reduce this dodging ourselves by always paying traders and businesses by cheque, card or automatic transfer and requesting a numbered receipt (VAT number too – any business with a turnover of more than £82,000 [which includes materials] must be registered – that could normally include your plumber).
Although it is perfectly lawful to pay by cash. Anyone who demands cash only or offers a different price for cash only is probably a tax dodger. It is not only VAT but national insurance, income tax and other regulatory and social requirements.
I refuse to do business with such people and I suggest that everyone does the same. I think it is rather hypocritical of people demanding government to act on tax dodging when they do not do so themselves.
I want a tax system that is simple, competitive and fair. The vast majority of British people and businesses 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.
That’s why I’m pleased that Liberal Democrat Chief Secretary to the Treasury Danny Alexander has made tackling tax avoidance a top priority and has made progress on many of the issues you raise. 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 the national 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 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 Britain. 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.
I’m pleased that we have also worked internationally to tackle tax avoidance and that this was one of the main goals of Britain’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 I am proud of the work that Liberal Democrats have done in Government 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.
In future, Liberal Democrats are determined not to let up in the fight against tax cheats. 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 companies listed in Britain. The majority of these proposals will be introduced through the annual Finance Bill, allowing us to take regular action throughout the Parliament.