The government is proposing to introduce a number of freeports around the UK. While there has been limited information provided on the specifics, the proposal is to have zones with lower taxes and regulatory standards. Tax Justice UK is deeply concerned that this would create micro tax havens dotted across the British countryside and fail to spur any new economic development.
Read our full response to the government's consultation. This response was supported by War on Want and the Women's Budget Group.
This blog originally appeared at the CLASS think tank.
Today Rishi Sunak announced a £30bn package to support jobs. This is on top of £160bn in spending already announced to deal with the crisis.
In usual circumstances this would be a lot of money, especially from a Conservative chancellor. But many have already questioned whether it’s enough given the scale of the economic turbulence we’re facing. The Labour shadow chancellor Anneliese Dodds dismissed it as “barely touching the sides”.
As well as more spending, Sunak revealed £8bn of tax cuts. Firstly, he has cut stamp duty on houses worth less than £500,000 until next March. This is an expensive policy, coming in at £3.8bn. The main result is likely to be higher house prices, as opposed to helping people get on the property ladder or doing anything for renters. It appears that the cut is structured in such a way that property investors and those buying second homes will also benefit. Shelter estimates that up to 230,000 people face eviction when the Covid-19 ban on evictions is lifted in August. Stamp duty is a bad tax, but this cut does very little to solve the broader problems with the housing market.
Secondly, the chancellor has cut VAT from 20% to 5% for six months for the hospitality sector. The impact of this is more nuanced. It’s likely to put more cash in the pockets of hard hit businesses who are struggling and have spent money on making their premises suitable for social distancing. This is good.
However, the big barrier to recovery for cafes, restaurants and hotels is people holding back from spending because of fear of catching coronavirus. While infections are still relatively high, and a second wave is possible, it’s hard to see things returning to normal.
Today demonstrated that there is a new consensus emerging in favour of higher government spending. The Prime Minister has repeatedly claimed that “austerity is over”. We must hold him to this promise. This means we’ll need a public conversation about how to support a bigger state. As Anneliese Dodds pointed out in her response to the budget announcements, tax rises in a recession are a bad idea as they dampen demand.
But in the long run, higher taxes are on the cards. As I argued in the Huffington Post this morning, politicians should look to taxing wealth as part of the solution. In the UK, wealth inequality is double that of income inequality, and we under-tax wealth. That’s why Tax Justice UK, along with 16 other organisations, are calling for ambitious tax reform to support a fairer and greener future.
Conditions on tax conduct, protecting jobs, global warming, executive pay and dividends have been revealed in the first “Project Birch” bailout of a company affected by the economic consequences of the coronavirus.
However, the government’s welcome move comes despite a lack of similar strings being attached to loans given through the Bank of England’s coronavirus corporate finance facility. It remains unclear if conditions will be placed on future bailouts.
Tax Justice UK has been working with the Fair Tax Mark and other organisations to get the government to attach conditions to any deals it does with businesses. The Labour Party also voiced support for similar measures.
Announcing the first bailout for Cesla Steel which operates in Cardiff, the government confirmed the company would repay its rumoured £30 million loan in full and meet a series of legally-binding conditions on preserving jobs, tackling global warming and restraints on executive pay and bonuses, as well as tax obligations.
Tax Justice UK joined other groups to write to Prime Minister [insert letter] Boris Johnson to insist that similar conditions be applied to all Project Birch bailouts and other bailouts of major companies.
An influential group of think tanks, campaigners and charities has joined Tax Justice UK in agreeing common goals to build back better in a world affected by coronavirus.
The pandemic has reminded us just how valuable the contribution of carers, nurses and key workers is to a caring society. In the long term we need to be spending more money on health, care and other areas to ensure we have a resilient society and economy. However, this cannot happen without reform of the tax system.
The UK’s approach to tax is dysfunctional: we don’t raise enough money, avoidance is rife and wealth is under-taxed. Despite progress, estimates suggest that £35 billion to £90 billion of tax goes uncollected per year.
The government also spends over £164bn a year on tax reliefs - many of which are badly targeted and largely benefit the well off and big companies. The corporate tax rate has been slashed from 28% in 2010 to the current 19%. The UK also contributes through its reliefs and loopholes to a broken international tax system, which deprives other countries of revenue.
The Covid-19 crisis shows that the government has huge financial power, flexibility and choice over how to support public spending. Our statement Tax reform to support a fairer and greener future argues that as the immediate crisis fades there will be big political debates about how to build back better. A fair tax system should underpin more investment in high quality public services and we must be ready to challenge those who are already arguing for austerity 2.0.
Tax Justice UK has developed a series of high level recommendations we believe the government should implement.
The signatories to the statement are: Tax Justice UK, New Economics Foundation, Women's Budget Group, Church Action for Tax Justice, Oxfam GB, Christian Aid, Institute for Public Policy Research, Jubilee Debt Campaign, Common Wealth, Centre for Local Economic Strategies, Positive Money, Quakers in Britain, Equality Trust, Tax Research UK, War on Want, Ethical Consumer, Taxpayers Against Poverty and We Own It.
Tax Justice UK is keen to work with other organisations who want to be part of a movement to bring about progressive tax reform and share our goals.
Download the statement here. Tax Justice UK has developed more detailed policy recommendations, which can be read here. If your organisation wants to support the statement, please get in touch - mail [at] taxjustice.uk.
Great news from Scotland and Wales where politicians have taken action to ban companies based in tax havens from getting bailouts.
This is a step forward in our campaign to ensure we bailout the workers, not tax haven billionaires.
Some companies have dodged their obligation to pay a fair share of tax in good times, only to seek bailouts when times get tough. It is right that we should protect jobs at this difficult time, but it is equally true there should be conditions to force responsible tax conduct on organisations that get support.
Westminster is well behind the curve on this issue. So Tax Justice UK has launched a petition to prompt MPs in London to get their act together on an issue of genuine concern to the public.
All governments need to go further and implement the Fair Tax Mark’s conditions for a fair tax bailout.
We want the Chancellor, Rishi Sunak, to take action and ensure that any bailouts come with conditions attached so companies pay their fair share of tax. You can sign the petition here.
The very richest are benefiting from lower tax rates to an extent not previously realised, meaning inequality in the UK is higher than thought.
An analysis of the tax returns filed by some of the richest people in the country by academics at Warwick and the London School of Economics, found a rising number of individuals recording millions of pounds of income as “business activities” rather than work.
The current rate of capital gains tax for higher earners can be as low as 10% once tax relief is taken into account compared to 45%, the highest rate of income tax.
The research concludes that inequality has been significantly higher in the UK over the past 20 years than previously assumed. This is because the Office for National Statistics does not include capital gains in its assessment of inequality in the UK.
Tax Justice UK Executive Director, Robert Palmer, said: “This groundbreaking study shows that the ultra wealthy have been able to reclassify their income as wealth in order to benefit from lower tax rates.
“It’s truly staggering when we consider the impact this has had on overall inequality in the country. The gap between rich and poor is bigger than thought and this has implications for people’s lives.
“But the government can do something about it: tax income from wealth the same as income from work. As we come out of the coronavirus crisis, this is precisely the type of measure the government should implement. Polls consistently show that the public would support such a move.”
The report, Capital Gains and UK Inequality, finds:
Research by the IPPR estimates that up to £90 billion could be raised over five years for public services if CGT was brought into alignment with income tax.
Arun Advani, Assistant Professor, University of Warwick and Andy Summers, Assistant Professor LSE Law,
International Inequalities Institute will present their findings at a Resolution Foundation seminar: The Hidden Rise (and Fall?) of the top 1% on Thursday 21 May.
A new opinion poll has found the public supports a wealth tax for people with assets over £750,000.
The 1,682 person YouGov poll reveals the public wants a different way of doing business once the corona epidemic is passed, it found:
Robert Palmer, Executive Director of Tax Justice UK, said: “The public are hungry for a new deal when we rebuild after this crisis. The government is under huge public pressure not to cave into supporting tax haven companies and it is clear that Brits want to see those who can afford it to shoulder a greater part of the burden to help pay for public services. The message is clear, no more business as usual.”
Tax Justice UK is calling for any corporate bailouts to follow the conditions laid out by the Fair Tax Mark, including requiring companies to lift the lid on their tax affairs, disclose who ultimately profits from their activities, and not use tax havens and tax avoidance structures.
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,682 adults. Fieldwork was undertaken between 7th - 11th May 2020. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
Moves in France, Denmark and Poland to ban tax haven companies from coronavirus bailouts are a start, but don't go far enough.
The UK should play hard ball with help only given as a priority to workers, not billionaire owners. Politicians should also insist companies stop using tax havens; lift the lid on clever accounting tricks; and end the mystery of who owns these businesses.
Read a comment piece by our Executive Director, Robert Palmer, about this issue in the Independent.
Responding to news that Denmark and Poland are to exclude companies based in tax havens from coronavirus related relief.
Tax Justice UK Executive Director, Robert Palmer, said: “The UK should follow Denmark and Poland’s lead and exclude tax haven companies from coronavirus relief.
“Companies that seek to dodge their obligations to society by cutting their tax bills shouldn’t expect a bailout when things go wrong. The UK should ensure that all bailouts come with conditions to ensure good business behaviour.
“After the crisis we need a new deal between business and government to ensure that all companies contribute properly, including by paying their fair share of tax. Bailouts should be accompanied by reassurances for workers on furlough that they'll still be supported."
The High Pay Centre has published a briefing note setting out the conditions that could be part of a broader approach to corona related support for businesses.
This comment piece by our Executive Director, Robert Palmer, first appeared in The Times.
The real heroes of our society are emerging: they are nurses, supermarket staff, delivery drivers and helpful neighbours. Many of these people are woefully underpaid.
The coming months will see politicians urge the public to show solidarity normally reserved for wartime.
When the worst is over, there will be a big debate about the role of the state and to what extent measures introduced to help get us through will be rolled back.
After the 2008 financial crisis, the burden of spending cuts fell disproportionately on the disabled, sick and vulnerable. Even the NHS, despite record investment, failed to keep up with demand. The promise to the families who have lost loved ones to this epidemic must be “never again”.
Politicians would be foolish to think that the public hasn’t noticed the deterioration of our public realm. One of the consistent messages I have heard in focus groups from Blyth Valley to Hastings since the election is that people feel insecure. Just about managing families are worried about their future amid pervasive resignation with the way things are.
That was the temperature of the nation before coronavirus arrived.
The health and economic emergency we’re facing has exposed even further the threadbare nature of our social safety net. This means that an austerity re-run is not an option. Instead, what we need is something closer to the spirit of 1945, when post-war rebuilding saw a new political consensus that included the founding of the NHS and an expansion in state support.
The Prime Minister has already suggested that he gets this. Earlier this month he said that: “In 2008 everyone said we bailed out the banks and didn't look after the people who really suffered. This time we will look after the people who really suffer..."
The government should be bold. Many of the changes introduced over the last few weeks, such as more generous sick pay and Universal Credit, must stay. But we should go further, for example by introducing a minimum income guarantee.
As we start to rebuild after the immediate crisis has passed we need a new social contract to support increased spending. Tax loopholes exploited by the wealthy and companies should be closed for good. Serious consideration needs to be given to a tax on wealth. Some are suggesting an extra levy on companies making super-sized profits, as happened during WWII. We also need to properly resource HMRC and stop the current programme of layoffs of tax staff who have been designated key workers. These measures would ensure that those with the broadest shoulders are contributing to our recovery.
Polling that my organisation - Tax Justice UK - carried out as we went into lockdown found that this would be popular. 74% of the public want to see the wealthy paying more tax. Only 24% of people rule out paying more tax themselves.
Before the virus struck, there were signs that a cross-party space was opening up to address issues of inequality and public services, with the Conservatives championing a “levelling up” agenda.
Once we’re through the worst of the crisis, these discussions will become even more acute. Progressive tax reform needs to be part of the mix if the public is going to be able to confidently say “never again”.