Every so often we put out a story that really explodes in the media.
This happened to us last week when over 900 newspapers and websites picked up a comment our executive director Robert Palmer made about the prime minister’s tax return.
Last year Rishi Sunak brought in £2.2 million in earnings. But he only paid 23% tax on it. This is the same tax rate as the average teacher. This situation is grossly unfair.
The story was picked up by, to name just a few: Sky News, The Express, The Mirror, and The Guardian. As well as nearly 900 local newspapers. Robert was also on LBC with Matthew Wright.
Why was there so much interest? The story was a spark, igniting a growing suspicion held by many: that there’s no cost of living crisis for the super rich. And that the very wealthy are not being fairly taxed.
How is his tax rate so low?
How does our tax system allow a multimillionaire to pay such a low rate of tax? In this case it comes down to capital gains tax.
Most of Sunak’s earnings in this period (£1.8m) came from financial investments. When you sell shares you pay capital gains tax on any profits you’ve made. It’s likely that the Prime Minister paid just 20% tax on these gains.
This rate is a lot lower than if he had earned £1.8 million through working. In this situation, Sunak would pay more like 45% in income tax alone.
20% vs 45%. That’s a big difference. It’s the key to understanding one of the ways in which very rich people pay much lower rates of tax than they should. This is deeply unfair.
We’re campaigning to ensure that income from wealth is taxed at the same level as income from work. So if your income is £2.2 million a year from whatever source, you pay the same rate.
Our research shows that in doing this we could raise up to £15 billion a year extra.
The NHS and other public services are facing existential crises.
It’s clear to any patient trying to get a GP’s appointment, stuck on a waiting list for years, or trying to find a dentist, that the system is not working as it should.
These services have been cut to the bone by austerity, underfunded for over a decade.
The quality of our NHS and public services is related to the level of tax we pay. So now is clearly not the time to be cutting taxes (as is being mooted by the Chancellor and the right-wing press). Even the International Monetary Fund agrees that tax cuts now are a bad idea.
For the life support our NHS and public services need, the government should pursue fair ways to raise tax revenues, not lower them.
Taxing very wealthy companies is one of the fairest ways we can do this.
It was disappointing to learn last week that Labour have ruled out any increases to corporation tax for five years, if they win the next election.
Corporation tax is currently 25%, the lowest in the G7. Meanwhile businesses benefit from numerous tax breaks and loopholes with very little government oversight, as I wrote about last week.
Just last year the Chancellor announced the biggest tax cut for large businesses in history - worth £50 billion over five years.
Plenty of companies have recorded soaring profits in recent years, while the rest of us continue to face unaffordable bills and a deteriorating social security net.
Tax is about political choices
Raising corporation tax, at least in line with comparable countries, is a sensible and fair way to raise more money for our public services.
Our executive director Robert Palmer wrote to The Times pointing this out, arguing it was out of touch for shadow chancellor Rachel Reeves to rule out raising it. The Mirror and The Guardian also picked up what I said.
Tax is about political choices. Who should pay for rescuing our sinking public services, for example? Big companies and their shareholders, or the rest of us?
There’s a risk that Rachel Reeves is backing a future Labour government into a corner. Ruling out various sensible and credible funding streams will make it harder to invest to save our crumbling schools and hospitals.
Whichever party wins the next election has a massive job on their hands to breathe life back into Britain and its public services, after 14 years of neglect and underfunding from Conservative governments.
The UK spends hundreds of billions of pounds a year on tax reliefs. But a new report suggests that the government doesn’t have a clear idea of whether these tax reliefs are actually achieving their aims – or are just a costly bung to favoured industries.
The report from the National Audit Office highlights that tax reliefs cost £204 billion every year – that’s £204 billion that otherwise would have been collected in tax, if the tax relief didn’t exist.
Tax reliefs are used by the government to try to encourage certain activities or types of investments.
Businesses lobby for special treatment and it’s often unclear whether tax reliefs provide value for money. This is why it’s really important to know whether tax reliefs are working as intended or not.
But there’s a problem. HMRC is given a miniscule budget of just £600,000 a year to run assessments to measure whether these tax reliefs are achieving their objectives.
These assessments are also crucial to gauge whether tax reliefs are open to fraud and error, and potentially being abused to evade tax.
That’s just £600,000 to assess and monitor £204 billion of tax reliefs. It’s a real jaw-dropper.
And the result? HMRC have assessed only a fraction of tax reliefs over the past nine years.
A glimpse into the unknown
One of the tax reliefs they did assess – research and development relief for smaller businesses – was being claimed fraudulently or in error a quarter of the time. That’s over £1 billion a year that was claimed wrongly.
The bottomline: a large number of tax breaks – worth hundreds of billions of pounds a year – are being left open to abuse, with little or no scrutiny by the government.
It’s a shocking revelation, and yet another piece of evidence that HMRC is woefully under-resourced to properly police and scrutinise our tax system. We reported in last week’s newsletter on the same issue.
It shouldn’t be this way
Our public services are desperate for more investment.
If the government had a better idea of which tax reliefs were working, and which tax reliefs could be scrapped, we could free up billions of pounds for investment.
At Tax Justice UK we’ve identified just 5 tax breaks that could be closed, which would raise £7 billion a year. This is money that could be pumped straight into our struggling hospitals, schools and communities.
HMRC hasn't prosecuted a single company for enabling tax evasion in six years, a new investigation found this week.
The tax authority was given criminal enforcement powers in 2017 to prosecute companies that help people to evade tax.
At the time, then prime minister David Cameron said that these new powers would “send a clear message to the corrupt that there is no home for them here”. Yet they have never been used.
This casts serious doubts over whether HMRC is preventing and deterring corporate tax avoidance.
So what has led to HMRC being so toothless?
Outgunned and outmaneuvered
As I told The Observer, HMRC is routinely outgunned by the private sector. They simply don’t have the resources to prosecute rich and powerful corporate players.
Criminal prosecutions, especially against big corporate legal teams, take time and money. Yet HMRC is chronically underfunded and understaffed.
As we reported last year, a Parliamentary committee slammed the government for underfunding HMRC.
They estimated that £42 billion could be missing in unpaid tax. And that for every £1 invested in HMRC investigations, £18 was recovered in additional tax.
The government should give HRMC the resources it needs to pursue tax evaders. The new revelations, based on research by the Bureau of Investigative Journalism and TaxWatch, will only increase pressure on them to do so.
This week some of the world’s wealthiest and most influential decision-makers are meeting in the Swiss Alps resort of Davos.
This is for the annual World Economic Forum meeting, an exclusive Glastonbury festival for the rich and powerful.
Over 100 billionaires are registered to attend the event, alongside more than 2,500 other attendees, including heads of states, senior politicians and business leaders.
The Chancellor Jeremy Hunt, and his opposite number, Shadow Chancellor Rachael Reeves will be in attendance.
Given Hunt and Reeves’ trip to Davos, our friends at the JustMoney Movement are asking people to sign on to their open letter to them, calling for fairer taxes to tackle inequality. You can sign the open letter here.
The Davos meeting brings into sharp focus the astronomic inequality of wealth in the world. This week Oxfam released a report that shows the five richest men have doubled their fortunes in the last 4 years, while almost 5 billion people are getting poorer.
With such eye-watering collective wealth on show in Davos, it shines a light on just how much money could be raised for public spending if progressive taxes on wealth were introduced.
Our Head of Advocacy and Policy, Rachael, spoke with Carole Walker on TimesRadio earlier this week. Check out the clip from the interview, and share it here.
Taking a stand
We’re not the only ones making the case for fairer taxes. Our friends at Patriotic Millionaires UK are putting their collective influence to work to make the case for higher taxes on wealth.
In fact, they’ve organised a letter signed by more than 260 millionaires and billionaires imploring politicians to be brave and implement a tax on extreme wealth. A poll of high net-worth individuals in G20 countries found that nearly three quarters of millionaires support higher taxes on wealth.
Actor Brian Cox, the star of TV show Succession, is supporting the letter and said: “We are living in a second Gilded Age, billionaires are wielding their extreme wealth to accumulate political power and influence, simultaneously undermining democracy and the global economy. It’s long past time to act.”
While extreme wealth is on display in Davos, we are pushing ahead with our plans for the year to keep banging the drum for fair taxes to invest in Britain.
Happy New Year from the team at Tax Justice UK
Despite inflation figures falling, food prices are still far too high, bills remain unaffordable for millions, and waiting lists for crucial services are soaring.
With public services in a downward spiral, and multiple crises affecting the lives of people in every corner of the country, this can’t continue.
Things need to change.
The prime minister has strongly suggested there will be an election in the second half of the year.
Britain will be joining over 50 countries, representing more than 40% of the global population, heading to the polls. 2024 is being dubbed the year of democracy.
This presents us with an opportunity to make the case for a progressive tax system that works for all of us, rather than a handful of the richest.
It’s an opportunity to put pressure on the parties vying for power to prioritise fair taxes that would raise funds to sort out the state of the country.
Far too many ultra-rich individuals and wealthy corporations get away without paying their fair share of tax.
A fair tax system
For too long tax has been described as negative, or something to be avoided. Sometimes seen as a penalty for hard work, or a bug-bear to raise with family and friends.
But what if we turn it on its head?
Our job at Tax Justice UK is to make the case for tax as a force for good. A tool that can turn around the fortunes of this country. A way to raise revenue to end the era of foodbanks and decimated public services.
Tens of billions can be generated that can be ploughed back into Britain to benefit each and every one of us.
Whether funds are used to train new doctors and nurses or teachers, invest in the sustainable economy, or revitalise our towns and cities, fairer taxes can build Britain back up.
Increasing taxes on wealth and closing unfair tax loopholes are key to making the tax system fairer.
With 2024 being a year that could see great change, we need to bang the drum even louder for fair taxes.
We will make our voices heard in the run up to the election that fairer taxes will be essential to lift Britain up. We will keep getting on the news, and into newsrooms to make the case for wealth taxes and closing unfair loopholes.
Our message will be heard in Westminster as part of our plan to influence politicians, and we’re going to push back against attempts to scale back or abolish taxes that raise vital revenue from the wealthiest.
Together we can continue building an unstoppable force for fair tax this year, and every year after.
It sometimes feels like we’re living in a vacuum of political leadership. Crises batter the UK from all sides, from our struggling NHS to crumbling schools, unsafe housing to local councils going bankrupt.
Neither of the main parties have set out credible plans to tackle these challenges.
This week Labour continued to say they “won’t turn on spending taps” if they win the next election.
While Chancellor Jeremy Hunt took to The Times, floating more tax cuts in the new year. Tax cuts now will lead to more spending cuts from public services later.
If nothing changes both parties are racing towards a new era of austerity post-election. We can’t let this happen.
A looming funding crisis
Our NHS and public services are already on their knees. Yet a recent report showed that because of an ageing population, by 2030 they will need an extra £142 billion a year, just to keep running as they do now.
That’s a huge amount of extra money. But both parties aren’t properly engaging with this fact – they are focused on the upcoming election.
Our work shows that much of the extra money needed to fund our health and other services can come from taxes on the very wealthy and through closing unfair tax loopholes.
And we’re not alone in this view. Big voices in the media increasingly agree. This week veteran journalist Andrew Marr said Labour should look at wealth taxes.
Taxing wealth more
The wealth of the UK grows every year. And taxes on wealth do already exist, but they don’t work very well.
Research from the Resolution Foundation this week showed how household wealth has grown consistently from the 1960s, and spiked in the last five years.
Wealth taxes throughout this period have remained at around 3% of GDP, however.
If we want a decent NHS and public services in the future, the rate we tax wealth at must increase. £50 billion a year could be raised from a range of wealth taxes, which we set out back in March.
Becoming a billionaire
Wealth taxes can also tackle inequality. A fascinating new report shows that most new billionaires this year got their money from inheritance, rather than earning it themselves.
If we want to reduce the ballooning wealth – and power – of a tiny elite of people, we need to tax their wealth more.
This would help to give us the extra revenue we need to future proof our NHS and public services.
As I see it, the options facing the UK are to either: tax wealth more, or witness the welfare state being dismantled further.
With your support, we’re going to keep fighting for a better future. We believe in a fairer, more equal country that works for everyone.
That starts with ensuring our public services urgently receive the extra funding they need – and we know that money can come from taxing wealth more.
£3.8 trillion of tax will be lost to tax avoidance globally over the next decade, Tax Justice Network estimates.
A lot of this is down to large multinational companies ‘shifting’ profits to countries where corporation tax is low or non-existent.
Our friends at TaxWatch recently demonstrated how big tech firms could be starving the UKs public purse of billions a year.
This is standard practice by many wealthy global companies, however it’s deeply unfair and deprives countries of tax revenues they need.
Let’s take Amazon for example. For two years their main UK division has paid no corporation tax in the UK, despite making hundreds of millions of pounds in profits (£222m in 2022 to be exact).
How? Firstly, Amazon has benefited from generous tax breaks for business investment in the UK.
Secondly, Amazon declares a lot of its revenue in Luxembourg, instead of the UK, where the rate of tax is generally lower than the UK.
Amazon does not have to declare where sales are made on a country-by-country basis, so the scale of tax avoided in the UK isn’t certain.
Amazon uses this arrangement in many European countries. It was claimed in 2017 by the European Commission that this means Amazon don’t pay tax on nearly three quarters of their profits in the EU.
Taking and not giving back
Companies like Amazon rely on the things taxes pay for, yet they don’t contribute in a fair way to the bill.
Roads, police and fire services, power and water networks, public transport – Amazon relies on all of these things to run an effective business.
They need the UK to have healthy, well-educated workers – so the NHS and our education system contributes to their business success too.
It’s unfair that companies like Amazon can use the UK’s public resources to generate record profits, while doing what they can to lower their tax bills.
At the same time, Amazon staff complain of poor working conditions in warehouses. Thousands of their workers recently went on strike over pay and conditions.
A historic UN vote
Things can change, however.
On Wednesday evening at the United Nations, 125 countries voted to create new global rules on tax.
It could be the next step in creating a fairer global tax system – and the next step in concerted action against international tax avoidance.
This could be a game-changer: ensuring Amazon and other corporate giants cough up their fair share.
48 countries voted against it – including the UK, US and many of the richest countries in the world. You may be wondering why.
It’s simple. Tax Justice Network estimates these rich countries enable 75% of global tax avoidance.
The rich countries voted against
The UK voted to keep the status quo, in part because the UK benefits from tax avoidance. Not ordinary people, of course, but financial and legal services – those with the government’s ear.
It’s shameful that our government voted this way.
The UN will now start discussing and negotiating a plan for new global rules on tax, a UN Framework Convention on International Tax Cooperation.
We now need to make sure that the UK government does not try to obstruct the process going forward.
We’re going to continue following the process, and campaigning in favour of strong global rules to tackle tax avoidance.
In recent months rumours swirled that Jeremy Hunt would use the Autumn Statement to abolish or at least cut inheritance tax. And we were listening.
Inheritance Tax is not an ideal tax, and it’s unpopular with some, but it’s the only real tax on accumulated wealth we have. Only the top 5% of estates pay it.
Abolishing it would fuel rampant inequality in the UK.
For this reason we support a reformed inheritance tax – you can read more about why here.
We’ve been all over the media in recent weeks pushing back.
Our Head of Advocacy and Policy, Rachael, made the case for keeping inheritance tax on GB News last week.
The super rich should be paying more tax, not less, Rachael argued on Times Radio on Monday.
The same day she was also on The Jeremy Vine show on BBC Radio 2 making the case that the public are desperate for better public services – and taxing wealth more can help us get there.
We teamed up with the Trades Union Congress and had a full-page splash in The Mirror, demanding the Chancellor prioritise public services over inheritance tax cuts.
And our polling that found only 1 in 4 supported tax cuts over public investment was featured in The Guardian.
We fought and won
When Jeremy Hunt stood up in the House of Commons to read his statement yesterday, he didn’t mention inheritance tax once.
The government backed down. There is to be no change to inheritance tax.
They were forced to abandon their rumoured plan to help the already wealthy at the expense of everyone else - for now at least. We helped do that.
He reduced National Insurance
Instead Hunt set out plans to reduce National Insurance contributions for employees.
The plan will see National Insurance contributions for many working people reduced from 12% to 10% – a saving of about £450 a year for the average person. It will affect around 27 million people.
The cut to National Insurance was by far the most eye catching announcement in the Statement. And it may help the Conservatives prospects at the next election.
He ignored the crises battering the UK
But let’s be honest, this small injection of cash into peoples’ pockets won't change the multiple crises facing the UK.
Hospital waiting lists are surging and staff are absolutely burnt out – while our schools literally fall apart.
A crisis in housing sees millions residing in unlivable conditions – while local councils struggle to provide even basic services, and some face bankruptcy.
The tax cut announced yesterday may even aggravate the situation. As I tweeted, the £20bn giveaway will effectively be "paid for" by £20bn of spending cuts planned for after the election. These cuts will be almost impossible to deliver, setting a trap for whoever forms the next government.
The UK isn’t working for most ordinary people, and the Chancellor had no plan to address this – the planned spending cuts will only make things worse.
How to fix our country
To properly tackle the challenges everyone in the UK faces, the government needs to invest more in the NHS and all the different public services we rely on – from schools to transport; our police and emergency services.
We don’t want taxes on working people to go up. The money can come from those who are not already shouldering their fair share of the burden: the super rich.
If we taxed the income of the super rich at the same rate as work – and if we taxed them 1% a year on their accumulated assets, we could raise £50 billion a year.
We could also raise an extra £7 billion a year by closing just a handful of unfair tax loopholes.
This could be the boost to bring new life into our creaking NHS and public services.
The wealth is here in the UK right now to fix these problems. All we need is a government disciplined enough to go out and tax it.
The government could raise over £7 billion a year for vital public services by closing unfair tax loopholes, according to new Tax Justice UK research.
The situation facing the Chancellor on the eve of his Autumn Statement is stark. The NHS is perpetually in crisis, school buildings are crumbling, and people are struggling with a severe cost-of-living crisis with another unaffordable winter looming. Public finance solutions are needed more urgently than ever, particularly with the growing demand for increased spending on public services.
Tax Justice UK analysis demonstrates that closing just five tax loopholes, which benefit wealthy individuals and multinational companies, could raise over £7 billion a year. To give a sense of the scale of this subsidy, this could pay for all nursing and teacher vacancies across the UK with change to spare*.
These revenue-generating recommendations are put forward ahead of the Chancellor’s Autumn statement to offer feasible, pragmatic solutions to mounting crises. The policies have widespread support from economists, academics and respected think-tanks - including the Institute for Fiscal Studies (IFS) and The Resolution Foundation. Considering there are multiple tax loopholes that would benefit from being closed, these five are just a snapshot of the options available to Jeremy Hunt.
These five recommendations show that there is money available to tackle the urgent issues facing ordinary people.
Instead of sinking into fatalism and apathy, the Chancellor should use his Autumn Statement to raise urgent revenues and tackle NHS waiting lists and declining living standards.
1. End fossil fuel subsidies for oil and gas companies to raise £4.4 billion a year
Despite oil companies’ record profits since the war in Ukraine, the UK taxpayer continues to fund a loophole for the industry that the IFS has characterised as a "huge tax subsidy”. This is because the ‘windfall tax’ (Energy Profits Levy) implemented by the government contains “indefensibly generous” investment allowances. This loophole enables oil companies to claw back roughly £45 for every £100 spent on new UK oil and gas projects. This costs the taxpayer approximately £2 billion a year**. Additionally, Oxfam estimates taxpayers subsidise oil and gas companies in the North Sea for activities such as exploration and decommissioning to the tune of £2.2 billion. The UK taxpayer should not be footing the bill for polluting, highly profitable fossil-fuel companies, nor their cleanups. These climate-wrecking incentives must be shut down by the Chancellor as a priority not just to boost Treasury coffers but to speed up the transition to a low-carbon economy.
2. End classic car exemption to raise £130 million a year
Vehicles constructed more than 40 years before the 1 January of any year are exempt from paying vehicle excise duty. This subsidy for classic cars is a bizarre tax break, which highlights the inequities that have crept into the UK’s unwieldy tax system. At a time when people can’t afford to make ends meet, taxpayers should not subsidise an arbitrary tax break for a polluting hobby that could pay for over 3500 new nurses’ salaries a year.
3. End video games tax relief to raise £197 million
Video Games Tax Relief (VGTR) cost a record £197 million in 2022. Despite being designed as a relief to help independent developers produce “culturally British” games, evidence shows it is large, often multinational firms that are benefitting. HMRC data shows that claims over £500,000 account for 88% of the total amount paid out. And one big company in particular seems to benefit from the lion's share: US-owned company Rockstar, who produce Grand Theft Auto, revealed it obtained almost £80 million in VGTR in 2021-2022 - 41% of all VGTR paid out in the UK.
4. Close capital gains tax loopholes to raise £1.1 billion a year
‘Business Asset Disposal Relief’ is a tax break that lowers capital gains tax from 20% to 10% on the first £1 million of gains, when a person sells their company. This loophole has come under repeated criticism, including from think-tanks The Resolution Foundation and the IFS. There is little evidence that this tax break affects entrepreneurial activity, and the prospect of slightly lower taxes at the end of a person’s involvement with a business is not well-targeted in a business’ lifecycle, according to The Resolution Foundation. Considering there is an extremely strong consensus amongst economists and think-tanks around bringing capital gains tax in line with income tax at 40% (this is also one of Tax Justice UK’s six wealth tax policies), it is indefensible that a loophole further enables a carve out to a mere 10%. There is no sound reason why a person earning their income from selling a profitable business should pay a far lower tax rate than a person paying tax on their wages.
5. Close inheritance tax loopholes to raise £1.7 billion a year
Inheritance tax has a multitude of loopholes that enable wealthy estates to engineer their finances to avoid paying their fair share. This is evidenced by the fact that estates worth over £10 million pay an effective average tax rate of just 10% despite a headline IHT rate of 40%.
The Chancellor should also reform ‘business’ and ‘agricultural property’ inheritance tax reliefs, which could raise £1.5 billion a year. Evidence shows a small minority of very wealthy estates use these loopholes to avoid paying their full rate of inheritance tax. While abuse of agricultural property relief is pushing up the price of agricultural land, pricing poorer farmers out of the market. The Resolution Foundation, IPPR and the IFS have all put forward alternative policy designs, most recently with the IFS’s suggestion to cap business relief at £500,000, which we have used to calculate our revenue figure.
The Chancellor should remedy the fact that pension wealth is exempt from Inheritance Tax, which could raise £200 million a year. This enables heirs to receive a ‘defined contribution pension’ tax-free if the deceased dies before they are 75. This creates a bizarre imbalance, with inherited pensions benefitting from more favourable tax treatment than when they are used to fund retirement. It also distorts behaviour, creating an incentive for wealthy individuals to avoid drawing down on their pension, if they have other resources available. Economists have also raised particular concerns since pensions already receive significant tax advantages.
These recommendations sit alongside Tax Justice UK’s more ambitious policies for long term tax reform, outlined in our six wealth tax policies to raise £50 billion.
To see full citations and calculations, please click here.
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