Governments use taxes to discourage certain activities and behaviours – while encouraging others.
Cigarettes are a good example. The government tries to discourage people from smoking with high taxes on tobacco. They raise significant revenues in the process (£10.4 billion was raised from tobacco duty in 2024). Similarly, road tax on more polluting cars is generally higher – in order to encourage people to buy less polluting vehicles. Tax is a way to incentivise people to make healthier choices, or live less polluting lives, while raising useful revenues in the process. These revenues can be used to tackle the effects of the activity being taxed. Money from tobacco duty can be used by the NHS to treat lung disease, for example; or money from road tax can be used to tackle pollution caused by combustion engines. Jetting away with it It doesn’t always work this way, however. Especially when big business is involved. The UK aviation industry makes significant carbon dioxide emissions every year, contributing to climate change. You might think, by the logic set out above, the government would use tax to discourage flying; or at least make a revenue from it, in order to mitigate the polluting effects. And yet, broadly, the opposite is true. UK airlines benefit from extremely generous tax breaks from the UK government. They pay no tax at all on aviation fuel, for example. For too long the government has under-taxed the aviation industry. But I have some good news. Increase tax on private jets and premium tickets Taxes on wealthier flyers were increased by the chancellor in the recent Budget. Air Passenger Duty (APD) is a tax paid by airlines for every passenger who flies from the UK. It raises £3 billion a year. APD is a progressive tax. Passengers taking longer flights, traveling in business or first class, or by private jet pay more. The good news is the chancellor announced that he will increase air passenger duty from this year for passengers in premium economy, business and first class. We fully support APD and think the chancellor should go further – and raise the rates on business, first class and private jets much more. It’s the direction we must go in to avert climate catastrophe. Those with the broadest shoulders To make real headway in decarbonising and making the green transition, the government will have to raise and spend significantly more. This cost must fall firmly on those with the broadest shoulders. It must be a just transition. Airline Passenger Duty is a great example of this: it takes the lion’s share of its revenue from richer people – and discourages polluting activity. We could also introduce a frequent flyer levy. This would be a tax that increases the more flights you take each year. So those who fly more would pay more. Our friends at the New Economics Foundation set out how a frequent flyer levy could work. The rich pollute the most Research from Oxfam shows that richer people on average produce far more emissions than the less well off. The top 1% cause the same amount of planet-heating emissions as the bottom two-thirds of humanity, according to Oxfam’s research. We were proud last year to team up with Oxfam when they came out in favour of taxing the richest – and biggest polluters – more.
On 6 March Jeremy Hunt delivered his Spring Budget. The Chancellor stood up in the House of Commons and said that those with the broadest shoulders should pay their fare share. Yet he delivered a cut and run budget, knowing his government is trailing in the polls with an election likely to take place later this year. The tax cuts delivered at the budget will spell more agony for public services in the coming years. This is the opposite of what our country needs.
One thing that came through really clearly is that despite the continued cost of living crisis, Jeremy Hunt didn’t offer up a serious plan to help people that need it most. Britain needs sensible and well thought out investment, yet what it got was limited pledges that don’t meet the challenges of our time. While it was good to hear that the NHS will get capital funding to update IT systems, it was a drop in the ocean compared to the scale of the challenge the NHS faces. The Chancellor’s tax cuts were an obvious attempt to try to entice voters with an election looming. Jeremy Hunt cut a further 2p from National Insurance on top of cuts announced last year. But these measures are poorly targeted and won’t provide enough help to those that need it most. The average worker will only benefit by £8 per week, a paltry figure compared to the drastic rise in energy bills, food and essentials in the last couple of years. The last time national insurance was cut, polling shows only 7% felt like it made a difference to their own finances. The wealthiest households will benefit disproportionately from these cuts. In our reaction to the Budget on TalkTV, Rachael made it clear that for an average of £8 extra a week today, the country will be served up public spending cuts in years to come. What this looks like right now isn’t exactly clear, but we do have some ideas. We know that some government departments have protected budgets like the NHS and education. However, other parts of government will likely have their spending slashed. This means less money for councils, stripped back fire and rescue services, and eroded access to legal aid and justice through the courts. Simply put, further cuts will make the UK less safe and less fair. The Chancellor did make a few positive announcements. He scrapped the non-dom tax break that allows some of the super-rich to pay very low levels of tax. This has been one of Tax Justice UK’s top policy recommendations. This move shows that fairer taxes on the rich are politically possible. It also shows that outside of taxes on the richest, the options are very limited - taxes on wealth are where any government is going to have to look to find urgent revenues. Extending the windfall tax on oil and gas excess profits was another positive step. Giving HMRC more resources to tackle tax dodging is a no-brainer. Recent research by TaxWatch shows that for every £1 invested in compliance returns £14. But these measures are a drop in the ocean compared to what our country needs and as Robert pointed out on GB News, people aren’t buying it. Both the government and opposition have decried the state of public finances. Making tax fairer so the super-rich and wealthiest companies pay more is a smart solution to raise revenue - and it is wildly popular. Tens of billions of pounds can be raised every single year with just a small number of changes that adjust the balance of tax paid by those with excess wealth. The government could go even further by closing down or reforming deeply unfair tax loopholes, and raise more revenue, creating a fairer tax system in the process. This could also go some way to building trust, resetting the balance so that those that get their income from work are on an equal footing to those that derive their income from wealth. As the Chancellor said, those with the broadest shoulders should pay their fair share. If they did, we can avoid deep public spending cuts, and could see this country working properly again.
Next week the chancellor Jeremy Hunt will deliver his Budget.
There’s been an endless back-and-forth in the media. Will he cut taxes? Which taxes will he cut? Who would benefit? But it’s a sideshow. The Tories are dangling tax cuts in front of us, trying to distract us from the main event. Don’t be distracted The public realm is crumbling. Our NHS and services are falling apart after fifteen years of mismanagement and budget cuts. And they have no plan. The proposed tax cuts are a last ditch attempt to distract and to win a few more votes before the looming election. It’s a desperate cut and run attempt by the government, as our executive director Robert Palmer said on LBC News this week. But the UK public are smarter than that. We all know what a perilous state our country is in – and that tax cuts won’t fix it. The vast majority of people (74%) prioritise keeping taxes the same, or raising them, if it means better public services. That’s the finding of polling by Channel 4 News this week. They also found only 1 in 7 support tax cuts if it means cuts to public services. Spending cuts later Our polling shows the same. Since 2020 our research has shown most people don’t want tax cuts if it means public services get worse. And tax cuts now are almost guaranteed to mean public service spending cuts in the future. Jeremy Hunt is talking about this openly. The missing £36 billion One way to inject more money into our public services would be to go after those who dodge tax. Our friends at TaxWatch report that at least £36 billion of tax revenue goes unpaid every year. This is the ‘tax gap’. It occurs in part because HMRC don’t have the resources to properly investigate tax dodging. Another symptom of this was revealed on Monday. The Observer found that HMRC investigations of wealthy tax dodgers have halved in the past five years. “Parliamentary research shows that when the government invests in HMRC, the return on investment is significant,” I told the newspaper. In response to the story, the head of the Trade Union Congress, and boss of Richer Sounds, called on the government to take action against tax dodging. He should tackle tax dodging The tax gap is a huge sum of money. £36 billion-a-year is the same as the entire UK defence budget, or almost half the education budget. What’s the solution? TaxWatch rightly points out that HMRC needs to be better resourced to uncover tax dodging, and close the tax gap. For every extra £1 invested in HMRC, £18 is returned in lost tax. HMRC is also facing criticism this week for “all time low” customer service. Regular taxpayers are not getting the support and guidance they need. It can be impossible to speak to someone on the phone, while there is a special VIP phone line for ministers, civil servants and high earners. The solution is obvious. The government should invest more in HMRC to boost staff levels. This would generate more money to tackle the crises plaguing our public services. But will the chancellor listen?
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.
Photo by Evangeline Shaw on Unsplash
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. Stark inequality 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. Election looming 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. |
Sign up to our free weekly newsletter:
Categories |