The tax clock is ticking…You have until midnight to do your bit to stop UK poverty

Economics, Governance, Inequality, Poverty in the UK

Last night I spoke at the Frontline Club, one of the UK’s most prominent centres for media and current affairs as part of a debate on inequality and its damaging impacts across the world. The house was packed, and the stories told were worrying but propositional. Time and time again tax was returned to as one of the key solutions to stop middle and upper income countries sliding further into inequality and poverty.

The timing for such an impassioned debate couldn’t have been better. Today, across Britain, we will see the reality of inequality reflected in one of its starkest forms: money. It’s tax returns day, so by midnight tonight all individual self assessment tax forms must be submitted to the Government. From the richest with multiple sources of wealth, to the self employed on a wide range of incomes, it’s the last chance to submit accounts before automatic fines kick in.

As I know from personal experience, the tax returns rush is a stressful process, but it’s unarguably a vital one. Tax brings in billions of pounds for our Government to pay for schools, hospitals, pensions, transport, policing and many other services. It is our subscription to society

But some people, most of whom can afford accountants of high skill and dubious morals, have found ways of avoiding this stress. They don’t declare their income to the Government and therefore don’t pay tax on it at all. They are crooks that don’t pay in, right at the time that a recession-hit Britain needs their money the most.

As Oxfam reveals today, some very wealthy UK citizens are evading tax to the tune of at least £5bn a year by not declaring their offshore financial wealth to HMRC. Although we know the total figure for tax evasion of this kind – there are approximately 50 tax havens worldwide – the reality is that the number of them is far higher. Oxfam has chosen to focus in on the tip of the iceberg, because, as we show today, even an extra £5bn would go a very long way
to help stop Britain’s backwards slide into inequality.

So why does £5bn matter so much and what do we lose as it trickles out of the UK?

Crack down on tax dodging on poverty infographic

(click on the image to expand the infographic)

Lost revenue means lost investment in UK citizens. It means more cuts for all of us, because our government must cut even more deeply to make up the deficit.

If we could recoup that £5bn currently hidden away in offshore tax havens like Luxembourg and Switzerland, the government could afford to allow Britain’s meagre benefits to rise with the cost of living. This would help ease the burden on millions of people on low incomes across the UK. We could also spend it increasing access to childcare, which would help parents back into work. Or how about housing? If we had extra funds to invest in low cost housing we’d boost jobs as well as help stop homelessness.

Looked at in these terms, the loss of £5bn is a shocking waste, but it’s the Government’s weak response that has made us even more worried as anti-poverty campaigners. 

Yes – it has signed an information exchange agreement with Switzerland to find out how much money is hidden away and that is a great start. But its provisions are just a slap on the wrist, too weak to make real change. In the words of the Financial Times, the agreement is “too lenient on tax evaders and those who aid and abet them”. It allows people who have defrauded the UK exchequer of millions of pounds to pay a token fine and avoid any sort of wider exposure. A similar deal was
recently rejected by the German Parliament as being too soft on tax evasion, so why is it good enough for us? 

All this looks too much like one rule for those at the top, and one rule for everyone else. While a small group of wealthy tax-evaders hoard their millions in tax havens at all our expense, it seems the law is giving them an easy ride. But not so for the small businessman, who didn’t pay enough VAT, or the benefit claimant who did a few hours undeclared work. Equality before the law is a fundamental principle of democracy and it seems in scarce supply here. Everyone should play by the same rules, whether rich or poor.

The real meaning of inequality for those at the bottom of our society has been illustrated by the unsavoury nature of much of the debate around the recent Welfare Uprating Bill pitching fictional ‘strivers’ against ‘skivers’. Not content with cutting the real incomes of people relying on benefits to survive (although most of the people affected work), certain members of the Government and their supporters in the media have resorted to what amounts to a smear campaign
against those receiving benefits to label them as “undeserving” and “scroungers”, regardless of the shortage of jobs in so many parts of the UK or the fact that most are in fact working, their low wages topped up by benefits to keep them out of poverty.

If our Government had the will, it could collect enough taxes to afford to maintain minimum benefit levels and continue its deficit reduction programme. But it seems it would rather go easy on the criminal activities of rich tax evaders, whilst demonising millions of people struggling to make ends meet. As we all grapple with the reality of an economy teetering on the edge of a triple dip recession, our government should be looking elsewhere to recover money before making cruel cuts to already limited benefits.

Please share this blog and the infographic with others.

Author: Chris Johnes
Archive blog. Originally posted on Oxfam Policy & Practice.