Corporations and the wealthy - £25 billion a year tax avoidance

TUC Press Release

New research for the TUC published today (Friday) reveals that the public purse loses £13 billion a year through tax avoidance by the wealthy and £12 billion a year through tax avoidance by corporations. Altogether this adds up to £25 billion - or around £1,000 a year for everyone at work in the UK.

The research, conducted by accountant and tax specialist Richard Murphy, is published in The Missing Billions, the first in a new series of TUC pamphlets designed to stimulate debate called Touchstones. The research includes the analysis of 344 sets of accounts from Britain’s 50 largest companies and analysis of HMRC and other official statistics.

Analysis of the top 50 companies’ accounts shows that their effective corporation tax rate is 22.5 per cent - not the 30 per cent agreed by Parliament. The companies almost always pay 5 per cent less tax on average than they declare in their accounts and in the seven years up to 2006 their effective tax rate fell by 0.5 per cent each year.

The report shows how super-rich individuals avoid paying their fair share of tax. £3.2 billion tax is lost by turning earned income into investment income (which is taxed more favourably) or by shifting the income to others (such as spouses) in lower or nil tax bands. Another £3.8 billion is lost moving transactions out of the UK, £0.5 billion by turning income into a capital gain and £4.8 billion from various kinds of tax planning.

Half the amount lost to tax avoidance could raise the level at which higher rate tax starts being paid by £10,000 a year, which would also offer significant help to those on middle incomes; or increase the state pension by 20 per cent; or reduce income tax by 3p in the pound; or build an extra 50 hospitals a year.

The Touchstone pamphlet calls for:

a minimum rate of tax to be paid by all those earning more than £100,000 a year to limit their use of tax avoidance and tax planning, without affecting the tax rates of middle Britain
a stop to HMRC staff cuts so that there are sufficient resources to effectively collect tax
the non-dom tax loophole to be abolished
capital gains on assets held for less than a year to be charged to income tax
a change to the tax treatment of charities to give them more income and close a tax loophole, and
the introduction of a new ‘general anti-avoidance principle’ to make it easier to tax the super-rich and large companies.
TUC General Secretary Brendan Barber said: ‘There is mounting concern at the growing gap between the super-rich and the rest of society, but so far there have been few practical proposals to do anything about it. This TUC pamphlet is therefore doubly helpful. First it carefully works out just how much the super-rich and big companies rip the rest of us off by not paying their fair share of taxes. Secondly it sets out a practical set of policies that close loopholes, end abuse and starts the process of making the super-rich make a proper contribution - all without raising a single tax rate.

‘Our strong view is that the proceeds should be used to properly fund public services, where six million are facing cuts in their real pay, and relieve poverty - particularly child poverty. But you do not have to agree with our spending priorities to back our call for fair tax, and we recognise the argument at this difficult economic time for boosting the income of low and middle Britain through tax cuts.

‘This is not the politics of envy but the economics of fairness. It is all about getting rich and powerful people to understand they must play by the rules, not look for ways round them.

‘Most people think that we have a progressive tax system, but it has now been hollowed out by so many loopholes and allowances that too much tax is now voluntary for the rich. It’s time for a new campaign for a fair tax system - a campaign that can unite the vast majority of the population who do play by the rules and have nothing to fear from our proposals.’

TUC win ‘Pole tax’ reform for Polish workers

The TUC today (Thursday) welcomed a major victory for Polish workers in Britain who have been paying double tax on their earnings. A campaign by the TUC South West region has led to a treaty being signed today between the Polish and UK Governments that will make sure Polish workers do not pay both tax in the UK and high level tax on the same earnings when they return to Poland. Thanks to this treaty, UK tax paid will count against Polish tax.

TUC General Secretary Brendan Barber is visiting the Polish church in Bristol today where the problem was first raised with the TUC by the Polish support group, Polski Bristol. The South West TUC took up the campaign with Dawn Primarolo, Bristol South MP and Paymaster General, highlighting to the Minister the complicated tax rules and the fact that workers in other countries such as Ireland get better tax treatment. The Government has subsequently reached an agreement that will benefit thousands of Polish workers employed in the UK. Dawn Primorolo has signed the treaty today on behalf of the British Government.Speaking at the Polish church in Bristol this evening, Brendan Barber will say: ‘Unions, campaigners and community groups in Bristol have worked together to secure an important victory for thousands of Polish workers across the whole country and end this unjust ‘Pole tax’. The Government rightly recognises the value that Polish workers add to the UK economy and has responded quickly to union concerns that they were not being treated fairly.’

Julia Verne , Polski Bristol, said: ‘This is great news for Polish workers who have been penalised with unfair tax demands when they go home. The current double tax system doesn’t take into account the high cost of living in the UK and is especially punitive to workers on low pay. The system means that workers are left with very little disposable income. When we first raised this issue, the church was packed with workers who wanted to know why they faced double tax.

This treaty is great news and we are indebted to the TUC for helping us tackle this issue.’
Nigel Costley, South West TUC Regional Secretary, said:’Unions are giving on-the-ground support to Polish workers to make sure they are treated properly at work but we’ve proved we can also tackle bigger problems. I didn’t realise that they had to pay double tax and was pleased to help them campaign for reform. Dawn Primarolo has been very quick to respond to this issue and make the system fairer for workers in her own constituency and across the country.’