Tax avoidance – An issue for life, not just election year

01 Jan 1970 1:00 am by Leela Bozonelis

The UK's budget deficit - the difference between the amount the government spends and tax receipts - is forecast to be somewhere around £100 billion this year.  While down from a high of more than £150billion in 2009/10, this is still a world away from meeting Chancellor George Osborne's commitment at the start of the last parliament to eliminate it altogether.

Given the size of the hole in the public finances and the likelihood of much larger cuts in public spending during the next parliament, it would seem self-evident that all the major parties should be devoting much of their campaigning to measures to tackle tax avoidance.

Yet when it comes to tax evasion and avoidance, media coverage since December last year would suggest that both Labour and the Conservatives only care about how global corporations structure their UK operations in "tax efficient" ways.  Interest spiked in February when a former employee of HSBC's private banking operation in Switzerland revealed that it had helped thousands of customers avoid paying UK tax.  That resulted in HMRC reclaiming more than £135 million in unpaid taxes.

But in the grand scheme that is tax avoidance, £135 million is barely a drop in the ocean.  Research carried out on behalf of the Public and Commercial Services Union estimated that the amount missing from Treasury coffers each year because the tax system does not work as intended is close to £120 billion.

Coverage in the last week has centred on Labour's pledge to raise extra taxes by ending non-dom status, as well as to raise £7.5 billion by closing avoidance loopholes with the Tories promising to claw back £5 billion.  Neither figure would make any kind of dent in what today, five years after the coalition came to power promising to clean up public finances, remains one of the largest deficits in the western world.

Observers have been quick to criticise the lack of leadership on personal tax avoidance shown by both the government and other political parties.  Paul Johnson, director of the Institute for Fiscal Studies, told Radio 4 that both parties were "making up numbers" without any foundation in reality.  He said the entire debate on tax avoidance was "really, deeply depressing".

So-called Ultra High Net Worth individuals - those worth more than £20 million - have or continue to use private Swiss banking and receive the high degree of confidentiality that it affords them.  As a result, up to 5,000 of Britain's wealthiest individuals may continue to benefit from a certain amount of invisibility from the prying eyes of HMRC.

The electorate is told that deficit reduction remains the biggest issue facing the UK.  Yet personal tax avoidance has received barely any attention during the election campaign, raising the question of just how focused the political elite is on fair and transparent taxation and its potential contribution to closing the hole in public finances.

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