Where are the billions in missing tax?
It’s been a busy week for tax campaigners. It was reported that the Conservative party chairman, Nadhim Zahawi, has paid a £1 million penalty to HMRC for being ‘careless’ with his taxes.
Zahawi initially didn’t pay the right amount of tax on £27 million of income from YouGov, the polling company he founded. It’s been suggested he simply forgot. This stretches credulity, as our Executive Director Robert Palmer told GB News. Zahawi describes his actions as ‘careless’.
We all have to pay tax. When rich individuals and wealthy companies don’t fully comply, it dents confidence in the system for everyone else – and takes money away from our public services.
It’s staggering to believe that someone who was briefly Chancellor of the Exchequer, and in charge of our tax system, failed to pay his own taxes properly. It’s untenable that he remains in public office. Zahawi must go.
As Robert said on Sky News, the episode raises broader questions about how the UK’s tax authority, HMRC, operates.
The Zahawi case came to prominence following the relentless digging and media work of former tax lawyer Dan Neidle.
This case raises serious questions about HMRC’s own ability to investigate complex tax cases. HMRC’s problems go beyond Zahawi. The department lacks the tools and resources it needs to do its job properly.
Parliament’s spending watchdog said two weeks ago that there was a £42 billion black hole of unpaid taxes, in part because HMRC didn’t have the staff to enforce compliance.
HMRC staff who usually deal with tax dodging have been moved to work on Covid and Brexit in recent years, making the problem worse.
HMRC staff are under such a strain that they have announced they are balloting to go on strike. We're fully behind the over-stretched tax inspectors fighting for better pay and conditions.
These issues with HMRC are explored in greater detail today in a Guardian comment piece Robert wrote. In the piece he also sketched out the unfair – but legal – routes that are open to wealthy individuals and companies to reduce their tax bills.
In order to have a fair and effective tax system – that stops the rich and powerful playing by a different set of rules – HMRC needs to be properly resourced, as Robert told Julia Hartley Brewer on Talk TV.
HMRC staff are worth their weight in gold when it comes to bringing in tax. The government must invest more in the tax authority – and such investment would easily pay for itself through improved tax receipts. It’s an easy decision.
As Robert said on Talk TV, there are grounds for optimism. Over the last ten years governments around the world have made some progress on cracking down on tax dodging, in part due to pressure from tax justice campaigners. There’s so much more to do, but it is possible to change things.
News that the Prime Minister has ordered an ethics investigation into the tax affairs of ex Chancellor Nadhim Zahawi, is welcome, but will come too late for the public.
Zahawi has reportedly paid a penalty to HMRC of £1m as part of a tax settlement over allegations that he failed to pay the correct amount of tax.
But the damage to public confidence caused by the scandal has already been done.
Tax Justice UK Executive Director, Robert Palmer, said:
“Clearly it’s unsustainable for someone in these circumstances to continue to attend cabinet. Zahawi has to go.
“But the damage has already been done. At this time of year millions of people are filing their own taxes.
“The vast majority of people don’t have access to complicated means of slashing their tax bill. We need a wholesale reform to ensure that everyone, especially those with wealth, pay their fair share.”
The super rich just keep getting richer. And calls for wealth taxes are growing louder.
Since the start of the Covid pandemic, the world’s richest 1% have increased their wealth by a staggering £21 trillion – enough to lift 2 billion people out of poverty. That’s the shocking finding of a new report from Oxfam.
The report showed that the UK’s richest 1% are now worth £2.8 trillion, making them wealthier than two thirds of the UK population combined, as the Mail reported.
Rise in extreme poverty
Not only are the rich getting richer, but the poor are getting poorer.
Oxfam said the rise in extreme wealth was being accompanied by a rise in extreme poverty globally for the first time in a quarter of a century.
The charity is calling for the introduction of global wealth taxes on the super rich to reverse this rise in extreme inequality. And they are getting some important backers.
In October we set out five wealth policies that could raise £37 billion a year in the UK.
Big backers for wealth taxes
Tech billionaire Bill Gates backed the Oxfam report and said last week he supported the introduction of greater taxes on wealth.
While 200 millionaires from around the world have demanded leaders gathering at Davos this week consider wealth taxes. The Guardian newspaper also came out in favour in an editorial this week.
Bussinessman Ian Gregg, former director of highstreet baker Greggs, also said he supported our call for wealth taxes in a video in the UK this week.
Pressure is growing on governments around the world to take action on soaring wealth inequality. Public support for wealth taxes is spreading.
It’s been a great start to the year for the UK’s top earners. Our friends at the High Pay Centre calculated that FTSE 100 bosses were paid more in three days than the average worker will get across the whole year. The pay of the top company bosses is up almost 40% compared to last year.
But while the CEOs of Britain’s biggest companies are raking it in, many people working in our public services haven’t had a proper pay rise in over a decade. Given the ongoing cost of living crisis, it can’t be a surprise that nurses, ambulance drivers and rail workers have started 2023 with more strikes.
We can change things in 2023
If we are to tackle the problems our country faces, such as the collapsing NHS and care system, then we need much more public investment, supported by taxing the wealth of the super rich. I want 2023 to be the year when we start to see politicians act.
The budget in March is the first big chance this year for the government. Once again we’ll be pressuring Rishi Sunak and Jeremy Hunt to bolster public services by taxing the very wealthy more, as well as making the tax system fairer overall.
So much needs to be done
The crisis in our hospitals is a good example of the kind of battle we face this year but a version of that story could be told about a swath of public services. This fascinating Twitter thread from journalist John Burn-Murdoch sets out the impact of a decade of austerity. The state’s ability to respond to crises has been severely weakened.
We need politicians to prioritise long term funding for our public services. The fair way to do this is through taxing wealth more.
There is little doubt that the cost of living crisis has made things worse, but in 2022 we showed we can make the government act. Read more about what we achieved in 2022 here.
Election on the horizon
This year we will see all the political parties start to jockey for position in the run up to a general election due in 2024. It is a crucial moment to build the case for the role that a transformed tax system needs to play in dealing with the many crises this country faces.