Closing the UK tax gapby
With an economic black hole to fill, Philip Fisher wonders why the Chancellor isn't getting more aggressive with the tax gap.
With a Budget coming along in October and public finances at rock bottom, the Chancellor of the Exchequer should be looking at every possible opportunity to boost the accounts of UK plc.
Having blithely watched his Prime Minister break three manifesto promises last week, it is always possible that Rishi Sunak will choose to do likewise and increase taxes but that goes against his ingrained instincts.
Despite protestations to the contrary, we are more likely to see further austerity measures used to shore up the black hole rather than headline-catching hikes in tax rates.
Sir Keir Starmer would almost certainly advocate a different approach, involving an assortment of plans attached to tax the rich, ie our clients and maybe even ourselves.
These could include increasing revenues from capital gains tax, inheritance tax and maybe even the introduction of a wealth tax.
However, there is a very strong argument for taking a different approach either on its own or allied to some of those already contemplated. This would be to reduce the tax gap.
Some readers may have seen recent press coverage of report from the US Treasury asserting that the wealthiest 1% of Americans are responsible for over $160 billion of lost revenue.
It gets better when they start multiplying numbers up and claim that approximately $7 trillion of revenue will be lost over the next decade, with the Treasury asserting that taking reasonable measures to close the tax gap should recover at least 10% of that sum.
If only the United Kingdom was in that league.
Even so, while the numbers are disputed, it really should be possible to bring in tens of billions of pounds a year were HMRC to launch a concerted attack on those who illegally avoid (we may dispute the semantics but the principle is valid) and evade tax.
While ministers have a tendency to point the finger at plumbers and builders who prefer to be paid in cash, there seems little reason to believe that the position here is the similar from that in the States with the wealthiest 1% of Brits finding sneaky ways to get out of their tax obligations leading the field.
Measures to get a little bit more money from global giants such as Amazon and Google are already slowly beginning to take shape and may help to a degree.
However, making sure that the rich pay their fair share of taxes should be top of the agenda for any self-respecting Chancellor of the Exchequer, even one who is wealthy himself.
This kind of article usually invites howls of protest from those who run businesses advising the very rich on how to keep their money offshore or out of the clutches of our taxing authorities by various means both legitimate and nefarious.
In addition, many accountants seem to enjoy repeating ad infinitum that people should only pay the correct amount of tax that is due under the laws of the land. Nobody is going to disagree with that. The more significant question is whether the large sums of money that comprise the tax gap, even if it is calculated on a very conservative basis, should really be due under those laws rather than escaping through loopholes or pure cynical evasion of taxes.
Inexplicably, for many years the government has done its damnedest to reduce numbers of workers at HMRC, driving the best out either consciously or through lack of decent pay, career path and respect.
If it was serious about reducing the tax gap and by extension the country’s debt, it should be scoping up resources at the department by employing large numbers of well-qualified individuals charged with going on the offensive.
It is generally recognised that this kind of strategy tends to pay for itself approximately three times over, which makes one wonder why it never seems to form part of our government’s planning.
A cynical friend did recently suggest that the people who would find themselves under attack from schemes of this kind are also those that favour and fund the party currently in government.
That kind of thing happens overseas but surely not in dear old Blighty.