Monday, 28 September 2015

There isn't as much tax dodging as you think...


At least according to those lovely number-crunchers at 'Full Fact':

While HMRC estimates the total tax gap at £34bn, only £7.2bn of this is attributed to tax avoidance and evasion.

All this makes a fiscal strategy founded on reducing tax dodging pretty unsustainable - given that the current deficit is nearly twenty times that number. Mind you, it doesn't mean that folk don't try to pretend that there's oodles of cash out there in tax that should have been paid (by evil multinationals, bloated plutocrats and the sleazier sort of alternative comedian - all Tory scum of course).

The only remaining target isn't those wicked capitalists (or rather the ones who work in banks or run big companies with Swiss HQs) but the informal economy - about £5.9bn according to HMRC. Now this is a tricky area for two reasons - firstly, unlike the bankers and plutocrats, a lot of the people in this 'hidden' economy really are criminals and secondly another huge chunk of this economic activity is ordinary folk paying the milkman, plumber or cleaner in cash. And if that payment suddenly gets a whole lot bigger because of taxes we're going to do less of it.

All told there's not only less tax dodging than the typical leftie believes but action to get at the taxes alters people's behaviour. Which means we might not get more taxes even if we tighten up or change the rules:

The savings attributed to anti-avoidance measures usually come with a warning attached: all of the costings produced by the Treasury for the policies announced in the last Autumn Statement were given a ‘medium’ to ‘very high’ uncertainty rating by the OBR (with the largest savings also being those that were most uncertain).

The reason for this is that those looking to avoid tax may change their behaviour in response to a change in the law, or may find alternative avoidance schemes before legislation can catch up. This means that the tax currently avoided through these schemes is not necessarily the same as what would be recovered if they were closed – the participants may simply move their money elsewhere.

Given that 'Corbynomics' is, to a large part, dependent on this new stream of income. And if it isn't there the result is austerity - not the austerity of public sector budget cuts but the austerity of higher taxes, crippled private business and recession. A recession these people want to then escape by printing loads of money to throw at a problem they've created by lying about tax dodging and pretending that there's really a sustainable alternative to reformed welfare and a smaller public sector.


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