Labour to crack down on tax dodgers

Labour has unveiled plans for a crackdown on tax-dodgers if it wins the May 7 General Election, with a target of cutting avoidance and evasion by at least £7.5 billion a year by the middle of the next Parliament.

Shadow chancellor Ed Balls set out a 10-point plan – including the effective abolition of “non-dom” status announced earlier this week – and challenged rival parties to match it.

A Labour government expect the Treasury and HM Revenue and Customs to be ready from its first day in office with a draft Finance Bill to put the changes into law.

And Mr Balls warned HMRC that he will expect a report on all current measures and processes for tackling tax avoidance and evasion, so that as chancellor can start an immediate review of the tax authority’s cultures and practices and take measures in his first Budget to give it more powers and resources to act.

Among Labour’s proposals are changes to the so-called ‘carried interest’ rules which allow private equity managers to pay lower rates of Capital Gains Tax – instead of income tax – even when they are not investing much of their own money, as well as action to prevent disguised self-employment and close loopholes used by hedge funds to avoid stamp duty.

Mr Balls told the Observer: “The Tories have spent the last week explaining why they won’t tackle tax avoidance and defending the non-dom loophole.

“They just don’t understand that when working people are paying more in tax it’s a scandal that some people can get away with not paying their fair share.

“The Tories can claim they’ll raise money from tackling tax avoidance, but the amount of uncollected tax has gone up under this Government. And when push comes to shove they refuse to close the loopholes or take the tough action that will make a difference.

“It will take a Labour government to call time on this lax approach and launch an assault on tax avoidance.”

He added: “We will set tough targets for HMRC to reduce tax avoidance and evasion by at least £7.5 billion a year. Our 10-point plan will take the tough action needed to help us get there and we will start on day one of the next Labour government.

“We will close the loopholes the Tories won’t act on, increase transparency, toughen up penalties and abolish the non-dom rules. And our first Budget will make sure that, following an immediate review of HMRC, it has all the powers and resources it needs to come down hard on tax avoidance and evasion.

“Working people who are paying more in tax want everyone to pay their fair share. And there shouldn’t be one rule for a few and another rule for everybody else. The Tories should back Labour’s plan and stop defending the indefensible.”

Conservative Treasury minister David Gauke said: “Ed Miliband and Ed Balls turned a blind eye to aggressive tax avoiding and evading for 13 years when they were in charge – they were the tax avoiders’ friends.

“We have taken action as part of our balanced plan to reduce the deficit – clawing back £7 billion per year in lost revenue by forcing the wealthy to pay stamp duty on property, making sure bankers pay higher tax rates than their cleaners and ensuring big global companies pay their fair share of tax. And we will go further and claw back another £5 billion in the next Parliament.

“Ed Miliband has no economic plan to secure Britain’s future – and it’s hard-working taxpayers who will pay the price.”

Speaking to the Independent on Sunday, Mr Miliband compared himself to previous Labour prime ministers Clement Attlee, Harold Wilson and Tony Blair, who he said had each changed the way Britain was run – Attlee by creating the NHS, Wilson by backing the “white heat of technology” and Blair by restoring a crumbling public realm.

“If you think about successful Labour prime ministers, you think about Attlee, you think about Wilson, you think about Blair in terms of what they did when they came to power,” said Mr Miliband. “Each of them was calling time on an old way of running the country.

“If you think about the pattern of my leadership, whether it’s Murdoch, the banks, the energy companies or non-doms, it is about saying … we’re going to tear up the old assumptions.”

According to Labour figures, the tax gap between the amount thought to be due and the amount actually gathered by HMRC was falling by an average of £1.5 billion a year between 2005 and 2010, but had increased by an average of £1 billion a year after the coalition came to power.

A Liberal Democrat spokesman said: “Labour’s record in government shows that they cannot be trusted to tackle tax avoidance.

“This is the party who went on a prawn cocktail charm offensive in the City and turned a blind eye to corporate tax avoidance for 13 years.

“Liberal Democrats in government have not only saved billions by cracking down on tax avoidance loopholes, we’ve made it an offence if companies fail to put in place measures to stop economic crime from happening in their organisations in the first place.

“Our record shows that the Lib Dems are the only party that can be counted on to stop tax avoidance.”

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