Labour will bring in tough new penalties that will act as a genuine deterrent against abusive tax avoidance, Shadow Chancellor Ed Balls announces today.
Writing on his blog, Ed Balls says that tackling tax avoidance is vital to maintain public support for an open market economy, get the deficit down fairly and raise revenues to safeguard our National Health Service. And he says that we should be as tough on those who evade or aggressively avoid tax as the small minority who cheat the benefits system.
Ed Balls is announcing that the next Labour government will bring in tough penalties for those who are caught by the government’s General Anti-Abuse Rule (GAAR), with fines of up to 100 per cent of the value of the tax which was avoided through abusive schemes. This will ensure a genuine deterrent to aggressive tax avoidance with fines which can make those who use abusive avoidance schemes pay back twice the sum they avoided.
At the moment those who are caught using abusive avoidance schemes under the GAAR only have to pay back the tax which they should have paid anyway. This is because the government failed to back up the GAAR with proper penalties. The GAAR introduced by this government is too weak to properly deter tax avoidance because there is no disincentive for those trying to game the system.
This follows Ed Miliband’s speech today where he spoke of a “zero-zero economy” in which there is a proliferation of zero-hours contracts matched by some people paying zero rates of tax. And it builds on announcements made at the Labour Party Conference to close down tax loopholes in order to help raise revenues for a £2.5 billion a year Time to Care Fund to save and transform the NHS.
Responding a Conservative spokesman said: "This is feeble stuff from a party with no economic plan - and a leader who just isn't up it. Ed Miliband was at the heart of Gordon Brown's Treasury as year after year they broke their promises to deal with tax avoidance. In contrast, Conservatives are the ones getting to grips with the problem. If Ed thinks empty promises like this will get him into Downing Street, it's no wonder his own party are lining up to criticise his weak and ineffective leadership."
