Paradise lost in tax avoidance debate

Paradise lost in tax avoidance debate

by Murdo Fraser
article from Saturday 11, November, 2017

THIS WEEK'S publication of the “Paradise Papers” reignited the public debate about tax avoidance. The revelation that various wealthy individuals would use offshore accounts in order to minimise their tax liability comes as no great surprise, but unsurprisingly many of the public are dismayed that those with the most don’t always contribute what is seen as their “fair share”.

Even the world of Scottish football was affected, with the BBC reporter Mark Daly disclosing that Celtic FC’s largest shareholder, Dermot Desmond, owned an exclusive private jet company that used an offshore tax haven to avoid UK taxes. Many fans of the other half of the Old Firm leapt on this news gleefully on social media, delighted to have the opportunity to turn the tables on Celtic fans who had baited them over Rangers FC’s use of Employee Benefit Trusts in past seasons.

But while the public concern around the Paradise Papers is understandable, it is important to put all of this into context. Because the reality is that the UK’s record when it comes to reducing tax avoidance is a sound one.

HMRC have introduced 75 new tax avoidance, evasion and non-compliance measures over the last seven years, including tough new criminal offences that make it easier to prosecute both evaders and companies that fail to prevent evasion, In addition, penalties have been significantly increased, a new penalty introduced for those who enable the use of tax avoidance schemes that are later defeated by HMRC, and £800 million invested in HMRC’s compliance operations. Taken together this is expected to bring in an additional £7.2 billion in tax by 2020-21.

Contrary to what we sometimes hear, the UK’s tax gap is today one of the lowest in the world, and at just 6 per cent is the lowest on record. It has fallen from 7.9 per cent in 2005-6, raising an additional £12 billion a year to help fund public services. For comparison, the USA tax gap stands at around 16.3 per cent, a whole 10 per cent higher.

When it comes to assessments of the “black economy”, according to the World Bank, the UK has one of the smallest in the world, at 12 per cent of GDP. This is below the world average of 30 percent, and ranks the UK behind countries such as Canada, Germany and Spain, with even Sweden (at 19 per cent), that Scandinavian model often held up as an example for us to follow, having a black economy half as large again as ours. So, whilst there is always more to be done to collect taxes that are properly due, the current UK government has nothing to be ashamed of.

Not that any of this matters to First Minister Nicola Sturgeon, when there is some ill-informed grandstanding Westminster-bashing to be done. At First Minister’s Questions on Thursday she expressed her “shame and regret” at the UK Government’s record on tackling tax avoidance and evasion, notwithstanding all the evidence to the contrary.

It fell to me to gently remind the First Minister that she was a member of the SNP Government that gave £10 million in grants and assistance to the retailer Amazon to set up a fulfilment centre in Dunfermline, notwithstanding the rather questionable record that company has when it comes to tax contributions. As in so much else, it seems to be one rule for the SNP, and quite another for everyone else.

Nicola Sturgeon really needs to put her own house in order before she starts criticising others on tax avoidance. Not for the first time, the double standards on display from the SNP are quite breath-taking.



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