Tax Avoidance And Evasion: The Biggest Issue Facing Us Today

There are several slogans currently being pushed by the coalition government. These range from the spurious 'There is no alternative' (there always is, it's just that you think the alternative is not as good, others may not agree.) to the faintly patronising 'We're all in this together' and its corollary 'Together in the national interest.' . The main point of these slogans and the arguments they try and put across is fairly obvious. These are that unpopular decisions asking citizens to give up state help, services and tax have to be made and are on the whole fair, responsible and the right thing to do. Juxtaposed to this is the deficit figure, the national debt and the spectres of Greek style crises as well as images of benefit scrounging layabouts who are spending our money on mansions in Kensington. There is however another figure we could juxtapose with the cuts: that of avoided and evaded tax contributions.

There is an important distinction between avoidance and evasion, one that sometimes lost amidst the rhetoric, even amongst experts on the issue such as Danny Alexander Chief Secretary to the Treasury who gave a speech promising to clam down on both at the Lib Dem conference despite his own run in on his own Capital Gains Tax arrangements. Evasion the government shouldn't need to discover any great moral purpose to crack down on, it's illegal as well as immoral. Estimates by Richard Murphy of Tax Research UK put this cost to the UK as high as £70 bn a year. Others dispute this figure but what is not under question by definition is that the UK is legally entitled to this money. Obviously it would not be possible to recoup every penny both due to the sophistication of the crime and the sheer scale of it but just as we believe that the police should investigate every murder no matter how difficult and whatever the crime rate, our government has a moral duty to go after those who perpertrate this crime. Especially given the 'There is no alternative' and 'Together in the national interest' rhetoric. Recouping 1/10th of this sum, which is legally ours as taxpayers would remove the need for the most painful cuts to the poorest. Or if the government was differently inclined, a whacking great tax cut or £7bn more of the deficit. Your political hue decides the alternative. I would also say that pursuing this money would be very much in the national interest.

It is this first point that most angers the protesters I joined in shutting a Vodafone store last week. It is a well covered story but in short George Osborne went over to India to promote Vodafone in India (a country with whom they are also in dispute over taxes) days after writing off a tax bill which HMRC was in dispute with Vodafone over for an estimated £6bn, with Vodafone agreeing to pay roughly £1bn. A senior HMRC official described this as 'a spectacular cave in.' and Vodafone was also reported to have set aside at least £2.5bn to settle the claim. The UK government was legally entitled to this money, or thought it was, so why did it not try to recoup it? Especially at a time when 'there is no alternative.' £200m extra gained would have stopped cuts to the Disability Mobility Allowance which will leave disabled people in care homes stranded. £80m extra a loan to Sheffield Forgemasters, a business aiming to lead the UK's industrial recovery. One can dispute whether the amount gained would have been the full £6bn but every pound not gained is an extra cut that has to be made according to the coalition's own highly dubious position that the alternative would be bankruptcy.

Imagine my shock then to discover that the UK government and George Osborne in particular has now signed a deal with Switzerland, the Tom Hagen to the tax evaders Vito Corleone, to enable it to maintain secrecy for UK nationals' assets that sit in Swiss banks allowing the Swiss to effectively operate as an encouraged tax haven which the government are effectively promoting. UK nationals hold $61.5bn in undeclared assets in these banks, assets which in many cases will be the proceeds of tax evasion. Due to the anonymity of the individuals who own these assets they will go untaxed. Even though in many cases they legally should be. Effectively then the government is promoting criminality. Compare this with the lack of encoragement for benefit claimants to claim what they are legally entitled to. This could be linked to the appointment as a trade minister of Stephen Green, a former boss of the Swiss division of HSBC. Nice to know some of us are in this together, even if it excludes the majority of us.

Tax avoidance is a more difficult issue. It is legal but morally dubious, especially at a time of government imposed austerity. Tax avoidance mostly stems from the fact that the rich can sidestep the tax system in a way that an ordinary person, charged PAYE can't. In the case of Phillip Hammond he had what most of us would take as salary paid as a dividend so avoiding paying a higher rate of income tax. Perfectly legal but given the governments rhetoric morally dubious. All kinds of tax avoidance schemes exist, from Tesco's dubious holding companies to Topshop head honcho Phillip Green transferring ownership of his company to his wife before it paid one of the biggest dividends in corporate history. Our revulsion at this type of behaviour should be political. How can Nick Clegg, David Cameron and George Osborne be said to be promoting fairness and a 'progressive' system when it is one that legally allows the richest opportunities that are denied to the poorest? Nick Clegg was vehement in his defence of the Comprehensive Spending Review as being 'progressive and fair' even when the IFS said the opposite, apparently as we should put it into perspective: cuts in benefits would get people in work, despite the laying off of 490,000 public sector workers, and other such unproven though theoretically possible claims. However perhaps we should put the cuts into a greater perspective. We live in a society which affords great priveliges to the richest and in times of hardship attacks the poorest. Forcing a JSA claimant to pay 10% of his rent from his £65.70 a week dole if after a year he is still out of work while a multi millionaire can legally pay under 20% tax is not a fair and progressive response to a budgetary crisis. It is a gargantuan moral failure of our politicians not to tackle this issue. If society continues like this then then the next time a budgetary crisis occurs it will again be the poor that pay.

These two issues are I think two of the biggest facing us today. How can our self styled 'fair and progressive' government claim that these cuts are fair when it isn't even prepared to enforce its own tax code and is promoting criminality on a huge scale? This issue is non-negotiable. Every tax cheat needs to be chased fully and until there is an attempt to do this any cut can be decried as 'avoidable' 'unfair' on the grounds that it puts criminals above law abiding members of society, even before we get to the fact that these criminals can well afford to pay for their crimes, and those who are paying for them can't. Secondly if we want to build a fairer society we need a debate about tax avoidance and its costs and be asking why we afford these priveliges to the super rich like royals of old, free to decide how much of their taxable income is spent on the good of their fellow citizens and how much on yachting and diamond encrusted cocktails while the rest of us, from those at the bottom to the upper-middle class are left without much of a stake in wealth creation in our society. Unless tax avoidance is made much more difficult then we will never be all in this together, no matter how much the coalition wish it to be the case. Unless tax evasion is tackled fully the government do not even have a case to say so and are lying or more naive than a believer in Simon Cowell's love of music when they use any talk of 'fairness' 'togetherness' or any justification of their actions other than their own idological antipathy to the most vulnerable.