Labour targets £7.5bn tax evasion clampdown
Labour has claimed it will reduce tax avoidance and evasion by £7.5bn a year by the middle of the next parliament.
The party has also pledged to reduce pensions tax relief for higher earners, alongside similar plans by the Conservatives.
Shadow Chancellor Ed Balls laid out the target this weekend as part of a ten-point plan to tackle avoidance and evasion.
The plan, which includes previously announced measures on non-doms and a new tax avoidance bill, also calls for an immediate review of HM Revenue & Customs measures on avoidance and evasion.
The Labour proposals would also see both the Chancellor and the HMRC chief executive presenting an annual report to Parliament, and giving evidence to the Treasury select committee, on the government’s progress in tackling tax avoidance and evasion.
Ball says: “We will set tough targets for HMRC to reduce tax avoidance and evasion by at least £7.5bn a year. Our ten-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.”
The plans come as Labour unveils its 2015 manifesto, which promises that none of the party’s campaign promises will require any further borrowing, while also committing the party to reducing the deficit every year, with Budget sums independently verified by the Office of Budget Responsibility.
As part of the plans, Labour has also confirmed it would seek to limit tax-free pensions savings allowances for those earning more than £150,000.
According to the Institute for Fiscal Studies, the party’s plans are a modification of a policy launched by the party in 2009, which proposed restricting tax relief on pension contributions to the basic rate, but only for those with incomes above £130,000 and whose gross income plus employer pension contributions was above £150,000.
But the IFS warns: “The way the [2009] policy was designed meant some with large employer pension contributions would face a substantial increase in their income tax bill if their income rose from just under to just above the £130,000 threshold. For example, an individual earning £129,000 plus an employer pension contribution of £40,000 would face an increase in their annual income tax bill of over £10,000 if their current wage were to rise to £130,000, assuming a top rate of income tax of 50 per cent.
“Effects of this kind are almost inevitable when introducing complexities such as this which result in treating people very differently once their incomes rise above a certain level.”
Labour’s ten-point plan to tackle tax avoidance is to:
• Abolish the non-dom rules, while introducing a temporary residence rule for those in the UK for a short period of time, such as university students.
• Rewrite the rules which allow private equity managers to pay less tax than taxpayers even when they have not been investing their own money
• Close loopholes used by hedge funds to avoid stamp duty
• Force the UK’s Overseas Territories and Crown Dependencies to produce publicly available registries of beneficial ownership
• Increase penalties for tax avoidance including new penalties for those who are caught by the General Anti-Abuse Rule
• Close loopholes allowing some large companies to move profits out of the UK and avoid corporation tax
• End the “Shares for Rights” scheme
• Tackle disguised self-employment by introducing strict deeming criteria
• Tackle the use of dormant companies to avoid tax by requiring them to report more frequently
• Make country-by-country reporting information publicly available
