The budget: a missed opportunity
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.
Recent research by the economist Gabriel Zucman suggests that corporate tax avoidance via tax havens costs the UK about £11 billion per year, and that individuals hiding their wealth offshore deprive the exchequer of another £5 billion every year. Yet the most that the Chancellor was able to commit to in today’s budget was to raise an extra £4.8 billion by 2022/23 – less than £1 billion per year – through a small number of minor tweaks to the existing system, such as applying income tax to digital companies’ royalties relating to UK sales when paid to a low-tax jurisdiction, which will raise just £200 million per year.
The Chancellor missed opportunities to implement measures to crack down on tax avoidance, in the wake of the Paradise Papers, that would raise many more billions of pounds every year to support our public services. 208,000 people signed a Tax Justice UK / 38 Degrees petition this month, calling on the PM and the Chancellor to take action in a range of areas, including investing in HMRC enforcement, abolishing non-doms and increasing transparency in the UK’s overseas territories and for multinational companies. And yet increasing HMRC’s budget to crack down on tax avoidance by large companies would yield £97 for every £1 extra spent, according to its own figures.
At the same time, the government continues to lower business taxes in a misguided attempt to ‘compete’ with other countries to attract investment. Contrary to the Chancellor’s claim today that recent reductions in corporation tax rates have raised an extra £20 billion for public services, the Institute for Fiscal Studies estimates that these rate cuts have cost the UK around £16.5 billion pounds every year.
Will Snell, Director of Tax Justice UK, said: “Today’s Budget saw the Chancellor waste a great opportunity to capitalise on public anger in the wake of the Paradise Papers revelations. Public services are in desperate need of more funding, and yet the government has today chosen to ignore some obvious ways to increase the amount of money that it has available to spend on them. Cracking down on tax dodging by wealthy individuals and companies in a meaningful way could generate many billions of pounds in additional revenue every year.”
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