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Scott’s Blog

Tax avoidance or tax evasion? Really it’s about transparency

Monday, February 16, 2015

 

The tax row rumbles on as we start a new week. Labour has sensed blood on the issue and last week’s PMQs was dominated by allegations of tax dodging tory donors. In particular they seized upon the activities of former HSBC boss Lord Stephen Green and his role in the unfolding Swiss banking scandal and Tory Party treasurer, Lord Stanley Fink. The Conservatives then countered with allegations of tax dodging against key Labour donor Sir David Garrard and the apparent dubious tax planning of the Unite Union.

The tax row shines a spotlight on our society

But what does the tax-dodging row tell us about our politics and wider society? Paying tax is fundamental to ensuring that we have well-funded, quality public services and so that we can defend the realm. We should all want to pay our fair share in an ideal world.

Anyone who has ever experienced paying their tax returns late will no doubt testify to the aggressive nature of HMRC when chasing you up. Contrast this with holding cosy chats with the likes of Amazon, Google and Starbucks and the gentlemen’s agreement about how much tax they would like to pay. Is this fair? No, it is not. It is this unfairness that Labour are jumping all over and the public are with them, not that the opinion polls show any real bounce to their tax narrative.

Tax avoidance is legal, tax evasion is not. But where do we draw the line? Have any of you ever paid a sparky, plumber or chippy cash in hand for a bit of work around the house? Yes, would be the answer from the majority of the population. Well, if  you have, you've probably participated in tax evasion – a criminal offence!

There are two issues at stake here. One, getting the level of taxation right so companies and individuals don’t need to exploit the loopholes that exist to shield them from paying their fair share. Secondly, it is the negative impact wealthy donors and vested interests have on our politics.

If the level of taxation was fair and at a reasonable level for individuals and companies then I suspect there would be far less tax avoidance. We need to ensure that we have a competitive rate of tax to attract inward investment into Britain but a level of taxation that generates the revenues we require to fund the necessary government spending. We have far too many taxes and they are set at unfair rates which both encourage avoidance and in some cases, evasion. The government takes far too much of our money in taxation and so avoidance becomes attractive.

It goes deeper into how we fund our politics

But the tax row has put a spotlight on how we fund our political system. 95% of our politics is funded by the taxpayer, yet the 5% that is not brings our politics into disrepute. Party political funding should not be in the hands of vested interests, be they big business, high net worth individuals looking for peerages and gongs or trade unions.

The time has come to streamline our tax system. We need to get rid of the majority of our taxes, move to a flat tax and more VAT with much lower levels of individual and company taxes. Plus we need to introduce state funding capped and agreed for political parties. Donations from individuals, business and trade unions should be illegal. Only then will we have a tax and political system that is open, transparent and fair.

MP's should open up their books

But if like me you are getting fed up of hearing the verbal ping pong about which party attracts the most palatable tax dodgers in its ranks – let Parliament pass a law compelling each Member of Parliament, both Commons and Lords, to publish all their annual earnings from whatever source and let the public see what level of tax they pay – I can guarantee you – the issue would fall silent immediately.

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