Why, whenever the government declares war on tax cheats, does it feel like they’re taking one step forward after taking several leaps backward?
I see HMRC are making a noise today about their crackdown on tax cheats. Strategically timed no doubt to pour some water on the flames of anger that were ignited by news of Barclays' tax bill. This was closely followed by the shameful admission by the government that UK based multinationals will not be expected to pay tax on foreign profits.
The Managing Deliberate Defaulters programme will see letters arriving on the door steps of 900 tax cheats. The message will be: “We’re onto you and we’re watching you.” It’s meant to act as a deterrent to suspected tax fraudsters who will be put under increased scrutiny and if they’re found to be deliberately evading their taxes then criminal proceeding “may” also start.
I suspect this will only really hit small businesses and whether HMRC will be able to effectively resource this at a time when it has already cut a third of its staff since its creation and plans to cut 13,000 more over the next four years, remains to be seen.
The Department says that one of the main aims of this programme, which will name and shame those that don't comply, is to “reassure the compliant population that HMRC's does take action against deliberate defaulters.” This is an essential point for any tax system; it needs to be deemed as fair to be workable.
The vast majority of us are compliant in our tax affairs and we have had enough of seeing the super rich and big business being treated with a somewhat laissez faire attitude by government while the rest of us are forced to lump the burden.
Last week, Barclays owned up to paying just £113m in corporation tax during 2009, just 1% of the £11.6bn in profit it made. This sparked more mass protests organised by UK Uncut campaigners on Saturday. This included occupying branches of the bank and turning them into libraries and even a makeshift comedy club at its Tottenham Court Road branch with a Big Society bail-in set from comedian Josie Long. Brilliant stuff!
Tax justice guru Richard Murphy was on the case, being interviewed in response to the Barclays announcement by BBC TV news on Saturday. This coverage was no doubt made more possible by the coinciding protests of hundreds of activists across the country. His blog post from that day, 'Barclays - paying tax but where?' did an excellent job of getting to the nub of the issue.
Murphy again popped up on our screens on last night's Newsnight (28 minutes in) commenting on the scandal of our government's plans to stop taxing the profits made by foreign branches of multinationals that are resident in the UK. This is as a result of HMRC's consultation on corporate tax reform which sought the views of big businesses and their advisers. How's their next consultation going to be run? What to eat for Christmas dinner - only turkeys need reply.
Treasury Minister David Gauke introduced the consultation stating: “In recent years, too many businesses have left the UK amid concerns over tax competitiveness... the UK is headed for a more competitive, simpler, and more stable tax system in the future, creating the right conditions for investment.”
But this exercise wasn't about making it simpler for companies to pay tax, it was about making it simpler for them avoid paying their tax.
The theory goes that if multinationals don't get cosy tax breaks from our government they'll move their base elsewhere. However, as Richard pointed out when this was put to him on last night's programme, in reality this isn't the case.
In today’s Guardian Duncan Weldon quite rightly identifies that the 50p tax rate for those that earn more than £150,000 has been a major contributor to the 17.8% increase in tax receipts seen in January of this year. It seems that, rather than just keeping our fingers crossed and hoping for a trickle down approach, taxing the rich really does work.
We need to ensure that those that can afford the tax burden are made to pay up and not given preferential treatment and effectively allowed to hold our country to ransom.
The government must end the madness of letting banks pay just 1% on their profits and pandering to big businesses, allowing them to avoid paying their fair share. Until this is done, it will be an insult to the ordinary taxpayer every time we hear a millionaire cabinet member utter the words, "we're all in this together," and the protests on our high streets will continue.