What do Labour and the Tories think about tax?

April 14, 2015 2:32 pm

Labour’s claim last week that the Conservatives are the “tax avoidance industry’s political wing” was both unsurprising and inaccurate.

In line with Labour’s narrative of being a party for the people, Labour’s election chief Lucy Powell attempted to paint the Conservatives as a big-business party that is unwilling to tackle both tax avoidance – the practice of using legal means to pay the least amount of tax possible – and tax evasion – the practice of using illegal methods to avoid paying tax. In Labour’s election material, the Party has done this by highlighting figures by the Treasury showing that the tax gap – the amount of tax that should be claimed against the amount that is claimed – has increased slightly over the last few years. The reality is that the Coalition has taken strong action against both avoidance and evasion, and with the exception of a difference in accountability measures, there is not much difference in what both parties believe and the action taken by them so far.

One of the Coalition Government’s key policies was the introduction of Accelerated Payment Notices (APNs) as part of the National Insurance Contributions Act 2014. The introduction of APNs allows HMRC to claim money up-front on taxes that are alleged to have been avoided, thereby forcing individuals issued with one to go to court or face losing their money. Far from an anaemic policy, tax industry experts have argued that it goes too far by virtue of the fact that it goes against the presumption of innocence. In terms of money brought in, HMRC expects that that it will recoup £5 billion by 2017/2018, with a total value of all APNs issued – almost 50,000 – due to recoup the taxpayer £7 billion.

Policies like these were supported by Labour as they went through Parliament, with little action to either strip them back or make them more robust. If Labour wished to prove that they were the ones willing to take hard action to tackle tax avoidance and evasion, further action should have been taken whilst they were in opposition.

This does not necessarily mean that there are no differences between the Labour and the Conservatives. One of the key differences that has emerged over the weekend was that of their approach towards accountability, as indicated by Shadow Chancellor Ed Balls’ announcement unveiling Labour’s plans for tackling tax avoidance.

Despite once again showing similarities in rhetoric, notably regarding increasing penalties on those caught by the General Anti-Abuse Rule (GAAR) and to close loopholes, there was one key change: greater steps to ensure the transparency of HM Revenue and Customs, the government department responsible for collecting tax.

Balls’ plans included an announcement of a review into HMRC’s culture and practices, as well as a commitment by Labour for the Chancellor and the Chief Executive to present an annual report to Parliament, and give evidence to the Treasury Select Committee, on the Government’s progress in tackling tax avoidance and evasion.

Much welcomed is Labour’s announcement to draft a new Finance Bill even if doing so is very typical act for a new government. The new Bill would likely be given time for greater scrutiny, with the most recent Finance Bill, which was passed in the dying days of the last Parliament, being allotted just one day for debate in each of the House of Commons and House of Lords. This was something unforeseen, with Labour’s Shadow Treasury Spokesperson Lord Davies of Oldham stating that he could “scarcely for the life” of him remember a Finance Bill receiving less scrutiny than others.

With such similar aims and ambitions, Labour could be accused of painting an inaccurate picture of action already taken by the Coalition to tackle tax avoidance. The real question is, why is Labour not highlighting the real difference in its approach: accountability?

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