Tax experts Richard Murphy and Colin Hines published a report with Green Party MP Caroline Lucas yesterday, which argues that today's cuts in government spending are not economically necessary, but rather are "an ideological choice" - part of the Liberal-Conservative agenda for small government.
Instead of just slashing spending, the authors of the report suggest a number of other ways to cut the budget deficit. The proposals fall into two categories:
- Actions to tackle tax evasion and non-payment of tax
- Measures to tackle tax avoidance and raise additional revenues
So let's take a each set of proposals in more detail...
1. Tackling tax evasion and non-payment of tax
The report includes five proposals to tackle tax evasion and non-payment of tax:
(a) Stop HM Revenue & Customs redundancy programme: this would cost £10m a year, but pay for itself as a result of less tax evasion.
(b) Keep all local tax offices threatened with closure: again, the cost implications are minimal and will be paid for from enhanced local debt recovery and improved tax compliance.
(c) Aggressively collect tax due: in November 2009, HMRC estimated that there were £28bn of outstanding taxes owing to it. Greater efforts in tax collection could, as a result, pay rich dividends.
(d) Recruit 20,000 new staff at HMRC to train as taxpayers to tackle tax avoidance and evasion, enhance service to taxpayers, reduce fraudulent claims for payment made to HMRC, and recover debt owing: as above, the cost implications are insignificant in light of the additional tax that could be collected.
(e) Reopen tax offices (to house new recruits): since many offices are already available to HMRC under PFI schemes, the cost of doing this would also be relatively low.
2. Tackling tax avoidance and raising additional revenues
(a) Extend 50% higher income tax rate to all income over £100,000 (from current threshold of £150,000).
(b) End tax relief for employers on all salaries and benefits provided in kind that results in an employee having total income from related employments exceeding ten times median UK earnings in a year.
(c) Prevent anyone earning more than £100,000 a year claiming more than £5,000 a year in tax reliefs above their personal allowance.
(d) Limit the time period for the carry forward of bank losses.
(e) Reintroduce 10% tax band to help those on lowest incomes.
(f) Uncap national insurance contributions and make them payable on investment income.
(g) Additional 10% tax on bank profits.
(h) Limit ISA tax relief to funds invested in new Green projects alone.
(i) Introduce a General Anti-Avoidance Provision.
(j) Change the legislative basis for interpreting UK tax law so any action contrary to the spirit rather than the letter of tax legislation can be challenged in court.
(n) Reform rules on company residence so that companies cannot claim they've left the UK simply by holding their board meetings in another country.
(o) Enhance the rules on controlled foreign companies so that intellectual property rights cannot be easily transferred to tax havens without tax being due.
(p) Restrict the offset of interest against taxable income both for companies to reduce the incentive to overload companies with debt.
(q) Restrict the tax relief available to those borrowing to finance buy to let properties to create a level playing field between new owner occupiers and new landlords.
(r) Demand that all tax havens in the world enter into Tax Information Exchange Agreements with the UK.
(s) Promote the use of new mechanisms for Automatic Information Exchange between all tax jurisdictions except those where human rights abuses are commonplace.
(t) Reform the basis of tax residence in the UK so that a person with a UK passport is liable for tax on their world wide income unless they live in a state with a tax system broadly equivalent to the UK's.
(u) Radically reform the way in which small companies are taxed to both simplify current arrangements and prevent abuse. This would require the income of such companies to be treated as belonging to their shareholders, unless those shareholders are not resident in the UK, so preventing tax deferral by use of corporate structures.
(v) Introduce a 'Robin Hood Tax' on all derivate, swap, bond and over the counter trading in the UK.
(w) Reform the tax relief for charities to stop abuse, increase the income of charities and to cut their administrative burden.
(x) Introduce a 'bank debit tax' charging all payments from a UK bank account to tax at a tiny rate, and in the process replacing VAT, at last in part, with a more progressive tax based on a broader and therefore more progressive tax base.
(y) Introduce country-by-country reporting for all multinational corporations based in the UK, and demand it be introduced internationally by the International Accounting Standards Board and European Union so that multinational corporations will be required to account publicly for where they declare their profits and where they pay taxes, including full disclosure with regard to tax havens and secrecy jurisdictions.
(z) Introduce an empty property tax.