The government has talked a lot about tools to curb corporate tax avoidance. A key power, which it has available to it, is to require multinational corporations to publish their accounts on a country-by-country basis. This information is already collected by companies but is currently only available to HMRC. Making this information public would help expose the extent to which companies can slash their tax bills.
Building on two academic studies, Tax Justice UK and our sister organisation, Tax Justice Network, estimate that this move could bring in £2.5 billion in tax a year by deterring corporate tax avoidance. In the run up to the budget statement, we’re calling on Chancellor Philip Hammond to make use of the legal power.
Read the full briefing paper
Read the methodology
At least part of the extra £20bn a year the government has promised for the NHS should come from additional taxes on wealth, according to a new report from the campaigning organisation Tax Justice UK (TJUK).
Ahead of the budget later this month, the organisation is calling on the government to raise corporation tax, abolish entrepreneurs’ relief, reform council tax, make older workers pay National Insurance Contributions (NICs), curb the pension subsidy for the wealthy, and tax income from wealth at the same level as income from work. Together these proposals would raise over £23bn.
“A clear majority of the UK public support increasing tax to help fund the NHS. This is a golden opportunity for the government to reform the tax system so that wealth tied up in property and other assets is taxed fairly,” said Robert Palmer, CEO of Tax Justice UK.
In June 2018, Theresa May announced an extra £20 billion a year for the NHS by 2023. She promised that part of this would come from ‘fair and balanced’ tax increases. The NHS is facing rising costs due to an aging population, increasing obesity, and expensive new treatments.
Estimates suggest that just to maintain the current service, spending will have to rise by 3.3% annually for the next 15 years, with increases of 4% per year if services are to be improved. This represents an extra £95 - £124 billion by 2033-34 – a lot more than the Prime Minister promised.
In the current political and economic climate, further cuts to other government budgets such as defence, local authorities and housing would be difficult. Tax rises will have to form part of the solution to the NHS’s needs, and TJUK argues that the government should look beyond the three main taxes: income, VAT and National Insurance.
The organisation proposes four guiding principles to determine which taxes should go up: companies and the wealthiest should pay their fair share to ensure trust in the system; tax should increase in proportion to a person’s wealth and income; a sustainable tax system needs to look beyond increasing taxes on just those at the top and companies; and the poorest should be protected from tax rises.
In line with these principles it suggests raising the corporation tax rate to 20%, which would generate £8.4bn, abolishing entrepreneurs’ relief, which would raise £2.7bn, taxing income from wealth at the same level as income from work, which could raise £4bn, reforming council tax to more accurately reflect real property values, which would raise £5bn, applying NICs to earnings of those older than the state pension age, which would raise £1.3bn, and curbing the pension subsidy to the wealthy, which would raise £2bn. In total these reforms would raise £23.4bn a year.
Robert Palmer: “Our proposal is just one way in which the government could raise taxes to fund the NHS and promote a more equal and fairer society. Any reforms along these lines would need to be accompanied by greater efforts to clamp down on tax avoidance and evasion. Ultimately this should be seen as a real opportunity to have a broader debate about the level of public services we want and how to pay for them.”
Contact: Amy Barry on 07980664397 or firstname.lastname@example.org; Oliver Courtney on 07815 731889 or email@example.com; or Robert Palmer on 07817406618 or firstname.lastname@example.org
Tax Justice UK submitted evidence to the Treasury sub-committee inquiry into tax avoidance and evasion.
You can read the full text of what we submitted here.
The summary is:
The last decade has seen a shift in the way the UK government tackles tax avoidance and evasion. Responding to public anger over wealthy individuals and companies not paying their fair share of tax, and the need to plug holes in government revenue, the UK has joined countries around the world in closing loopholes and tightening enforcement. Following the financial crisis, the G20 declared in 2009 that ‘the era of banking secrecy is over’. There is anecdotal evidence that FTSE 100 companies, especially those with a high public profile, are less likely to use some of the more complicated tax avoidance schemes than used to be the case.
At the same time, the Conservative-led coalition government that came to power in 2010 pledged to create one of the most company-friendly tax regimes in the world. With a corporate tax rate heading to 17%, from 28% in 2010, there is simply less tax to avoid in the first place. The UK government has set out a policy to use the corporate tax regime to attract foreign investment. Mechanisms such the the Controlled Foreign Companies (CFC) rules and the Patent Box are part of this approach. Companies can use the UK’s light touch corporate tax regime, and the UK’s tax treaty network, to reduce their tax bills in other countries, including developing countries.
The risk of tax avoidance is still high for private companies and wealthy individuals. HMRC’s budget has been cut and it does not have the resources it needs to properly target tax evasion and avoidance. The agency’s governance also needs to be overhauled to insulate it from corporate capture, while at the same time responding to the needs of all stakeholders.
There are a range of things the government should do. They include:
We also submitted to the inquiry on tax disputes. You can read the text of our submission here.
By Robert Palmer
Scandals such as LuxLeaks, the Panama Papers and the Paradise Papers have shown how large corporations are able to conceal where they do business and how much they are paying in tax.
To help solve this problem leading campaign groups are calling on the European Union to require companies to publish key financial information on a country-by-country basis.
With this information, companies would no longer be able to hide the low amount of tax they pay in some countries. It would also help give tax authorities in developing countries the data they need to increase the domestic tax take.
Transparency proposals have the backing of the European Commission and Parliament. It's now time for EU member states to get on board. We hope the UK can lead on these reforms and then continue to implement them after the UK leaves the EU.
By Robert Palmer
Britain needs a fair and effective tax system that benefits everyone in the UK. But this was not on the top of Philip Hammond’s agenda as he updated us on the state of the economy. His spring statement was mostly a non-event as promised. The economy is ticking along better than predicted and borrowing is down.
The Chancellor did point to a number of consultations, including more attempts to go after big digital companies and a potential tax on plastics.
This shows some progress, but really Hammond is tinkering around the edges. For example, the proposed tax on digital companies revenues is a stop gap measure and appears to be fiendishly complicated.
The truth is that we need a fundamental rethink of our tax system. Taxes are one of the most powerful levers that governments have to influence the economy. But currently the tax system is not programmed to handle some of the biggest questions of our time.
Can we tackle the gap in wealth between baby boomers and millennials? Who will pay for climate change adaptation? How do we support people as they live increasingly long lives?
Since the 1980s there has been a shift away from the post-war consensus towards a smaller state with lower taxes. Tax is also increasingly paid by workers and not shareholders.
A clear example of this is corporation tax. In the 1970s it was 50%, but by 1997 the rate had fallen to 31%. The current government has dropped it to 19% and plans to cut it even further to 17%.
But, change is in the air.
For the first time since the financial crisis more people want higher taxes to cover increased spending than want taxes to stay the same. This is combined with the anger around tax dodging by some companies and rich individuals.
The Labour party has put the issue of tax on the agenda by proposing higher taxes on companies and the wealthy.
The Conservatives have made some helpful noises as well. In 2013 David Cameron argued that big companies had to wake up and smell the coffee and start paying their fair share. Last week the Conservative peer David Willetts said that "the age of tax cuts is over".
Tax Justice UK is a new organisation that wants to ensure that everyone in Britain benefits from a fair and effective tax system.
So what should Philip Hammond be doing?
On multinational companies we need to find a way of taxing the value created here in the UK. Companies like Facebook and Google hoover up huge amounts of our data which they turn into valuable advertising sales. One approach would be to tax a proportion of their global profits based on UK economic activity.
But we also need to have a broader conversation about who’s paying what and how.
Currently the tax system is skewed in favour of shareholders over workers. The way we tax multinational companies was designed in the pre-digital age and can penalise bricks and mortar companies over the internet giants. There’s growing appetite to look at tackling intergenerational inequality through some form of wealth tax.
We need to reframe the issue so that tax is something that people are proud to pay, and that it’s fairly levied. We have to make sure that people feel that they get good value for money through excellent public services.
This is something that more and more people support. Ultimately we need to reprogramme the tax system to help us achieve the world we want to live in.
By Robert Palmer
For the last eight years public spending in the UK has been squeezed, while the government has cut taxes. The UK aspires to Scandinavian levels of public services with US American levels of taxation. The problem is not that we spend too much money, but that we raise too little.
I believe we need to do more to make the case for the positive role that tax can play in society. Now more than ever we need an organisation championing a fair tax system that will benefit everyone in the UK. That’s why I’m really excited to start as the Executive Director of Tax Justice UK (TJUK).
As the head of TJUK, I will work to build support for a fairer tax system which enables good quality public services and helps to reduce inequality. I will also campaign for a more effective tax system, focusing on loopholes and clamping down on tax avoidance and evasion.
TJUK was incubated by the Tax Justice Network and spun out as an independent organisation with its own board and strategy last year in 2017. It will build on the pioneering work of organisations like UKUncut in raising awareness of how we need to fix the UK’s approach to tax.
TJUK is one of TJN’s many sister organisations around the world (see here for a full list).
TJN’s focus will remain on providing the research and policy arguments to make the global case for tax justice, and campaigning for change. Given that the UK and its various overseas territories feature so prominently in the Financial Secrecy Index, TJN will continue to highlight the international impact of UK and its secrecy network.
When I was at Global Witness I helped to lead a global movement to challenge how the financial system facilitates corruption and I worked closely with the tax justice movement, so I’m excited to be doing so again.
Find out more about our us by exploring this website and follow me on twitter. Tax Justice UK is on twitter too, as well as on facebook.
Tax Justice UK is delighted to announce the appointment of experienced economic justice campaigner Robert Palmer as its first Executive Director, starting on 12 February.
European governments are leading a race to the bottom which will see average global corporate tax rates hit zero by 2052, according to new findings out today. A detailed analysis of 17 EU member states and Norway reveals 12 governments have either just cut their corporate tax rate, or are planning to do so in the near future.
As big businesses are made to pay less corporate tax, consumers have to pay more in order to fill the gap. As today's report points out, this disproportionately hits the poorest and risks exacerbating inequality rather than reducing it.
Chancellor misses a golden opportunity to raise money by tackling tax avoidance in the Budget
Philip Hammond could have taken decisive action in today’s Budget to increase the amount of government funding available to support increasingly over-stretched public services, but he chose not to, according to the campaigning group Tax Justice UK.
Tax campaigners hand Prime Minister petition with 208,000 signatures in wake of Paradise Papers
Tax Justice UK, the country’s leading campaigning organisation dedicated to fighting for a fairer tax system, and 38 Degrees have handed in a petition calling on the Prime Minister and Chancellor to take the action needed to tackle tax avoidance in the wake of the release of the ‘Paradise Papers’. In under two weeks, the petition has attracted more than 208,000 signatures from UK taxpayers angered at the failure of the government to put an end to the abusive behaviour of multinational companies and wealthy individuals whose efforts to avoid tax have a direct impact on public services.