Written evidence submitted by Tax Justice UK
Tax Justice UK campaigns for everyone in the UK to benefit from a fairer, and more effective, tax system. Our role is to build the political pressure needed to translate good policy ideas into practice. We provide the crucial links between think tanks and academics on the one side, and the levers of power on the other.
This response is based on a statement signed by 18 progressive organisations, including Oxfam, the New Economics Foundation, the Quakers and IPPR, on what the tax system should look like after the current crisis. The full statement and list of signatories can be found here.
The coronavirus pandemic is a stark reminder of the value of those that provide the vital services on which we all rely - carers, nurses, bus drivers and others. Over the long term, we need to be spending more money on health, care and other areas to ensure we have a resilient society and economy. However, this cannot happen without substantial reform of the tax system.
The UK’s approach to tax is dysfunctional: we don’t raise enough money, avoidance is rife and wealth is under-taxed. Despite some recent progress, estimates suggest that £35 billion to £90 billion of tax goes uncollected per year. The government also spends over £164bn a year on tax reliefs - many of which are badly targeted and largely benefit the well off and big companies. The corporate tax rate has been slashed from 28% in 2010 to the current 19%. The UK also contributes through its reliefs and loopholes to a broken international tax system, which deprives other countries, and in particular those in the Global South, of revenue. As many economists have shown, wealth is under-taxed in the UK, leading to growing calls from across the political spectrum to tax it more. As our public attitudes research shows, this would be popular with the public.
The Covid-19 crisis shows that the government has huge financial power, flexibility and choice over how to support public spending, with an ability to draw on very cheap debt supported by Quantitative Easing. As the immediate coronavirus crisis fades there will be big political debates about how to build back better. Economists almost universally agree that the depths of a recession is the wrong time to raise taxes. This is especially true for the UK right now, where the cost of government debt is extremely low.
However, in the longer term, the government will have to look at reforming the tax system - both to raise revenues to help support spending and to meet the increasing calls to tackle ingrained inequality in this country.
A fair tax system should underpin more investment in high quality public services. As well as making the positive case for reform, it is vital to challenge those who are already arguing for austerity 2.0, restoring business as usual and cutting public services.
What needs to happen
● No bailouts for tax avoiders: Require companies receiving large bailouts to end artificial tax avoidance arrangements and tax haven structures, publicly disclose where profits are made and who benefits, and publish their tax policy.
● Tax wealth more: Ensure that income from wealth is taxed at least as much as income from work. Reform areas where wealth is currently under-taxed, such as property, inheritances, capital gains, dividends and pensions. Actively consider a wealth tax as is currently being explored by the multidisciplinary Wealth Tax Commission.
● Stop undermining the tax systems of other countries: Shut down the tax loopholes and secrecy provisions that deprive other countries of revenue.
● Enforce the rules: Further lamp down on tax avoidance and evasion. Properly fund HMRC and Companies House, and give them the tools so that they can enforce our laws.
Tax Justice UK has set out in more detail the policy changes needed to deliver the above recommendations here.
These changes are popular with the public. Tax Justice UK has been working with Survation and the University of Sheffield on a six months project exploring attitudes to public spending, tax and wealth. Using a mix of polling and focus groups we found that:
● The public is fed up with austerity measures and supports higher government spending.
● Almost half of people polled are willing to pay more tax themselves.
● There is strong support for higher taxes on wealth, if the policy change is framed in the right way as closing down of loopholes, ending unfair tax advantages for the well off or correcting historic imbalances in the tax system.
● There is almost universal anger at tax avoidance by big companies and individuals, even if the behaviour is strictly legal.
The final report of the project is due out in early September, but the interim reports are available here.
We would be happy to discuss this response in more detail.