After 14 years, we have a sparkling new government, but the openness and honesty of all the major political parties in their campaigning left a lot to be desired. Particularly when it comes to tax.
Politicians need to be straight with the public about the choices we have to make about how to fund the public services we all rely on. But, rather than having a grown-up debate about how overdue major tax reform is, we have instead attempted to box each other in to keep taxes as they are, or promise cuts, which the nation knows, deep down, they neither want nor can afford.
We are unlikely to all agree on exactly how the tax system should work — tax is, after all, a deeply contentious and emotive issue. Do we want to raise more money through taxation, or less — with the resulting impact on the level of public services we value? Do you favour broad-based taxes, or a more progressive model where those who can afford it contribute a greater share?
Regardless of our political positions I hope we can agree on the basic features we want for our country’s tax system.
• It must avoid being too complicated. The more complicated the rules are, the more people will find loopholes that make it harder, and costlier, for HMRC to collect the money. It should be easy for most people with simple affairs to understand and get right without having to rely on specialist advisers.
• It needs stronger safeguards and enforcement against avoidance and fraud.
• It should be applied fairly across society so taxpayers are treated consistently with as much transparency as possible.
• It should be funded properly and go after the tax gap mercilessly. When it is, HMRC’s record on tax collection is phenomenal … £14 collected for every £1 spent.
• It should be tough on those who don’t pay their share, reversing the status quo that makes evasion an almost punishment-free crime. Paying tax shouldn’t be a lifestyle choice — most people pay income tax at source and don’t have that luxury.
• It should hold the tax avoidance industry to account so that selling dodgy schemes (usually illegally) no longer pays.
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At the moment, we have an overstretched HMRC struggling simultaneously to answer the phone and police a complicated regime that can catch out innocent people or be actively exploited by those with the means to pay for “tax planning” advice.
Previous governments have decided that taxpayers are to be treated very differently according to the form their income comes in — if they have the capacity to operate through a company and pay themselves via dividends or capital gains they are rewarded with a much lower rate of tax. Is this fair?
Businesses that operate around the world have used international tax rules and havens to shift profits generated in the UK to arise elsewhere, undercutting bricks and mortar businesses like the retail company I built up. While not illegal, and their executives squeal that they are acting in the best interests of their shareholders, UK businesses find it deeply unfair and our public services are starved of much needed cash.
The problem, of course, is getting countries working in harmony to prevent the states “cheating” with the lowest tax rates from picking up all the income.
And we mustn’t forget the ongoing injustice that those of us with large or valuable homes are still paying council tax on 1991 values. How long will it take to get this sorted?
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Then there are the shopkeepers, before we become dinosaurs, waiting for the massively expanded e-tailer sector to pay their share of the business rates burden.
The feeling of inequality corrodes public trust and undermines our willingness to abide by the rules — fundamental to our democracy.
Eight years ago I founded TaxWatch, with the celebrated financial journalist and author Richard Brooks, to conduct independent research into tax compliance and to advocate for sound administration of tax law. This work continues to be relevant today more than ever.
Tax policy is always a choice and, at this important time in our history, I implore our political leaders to ignore the noise and come to a judgment about how the load is currently shared and, where they have plans for change, to be open and honest about their plans.
The lack of key detail in the manifestos left us all guessing and fearing what might happen after polling day. The new government has an almighty mountain to climb, but surely the best policy is to be honest about what really is possible with the money we have, while not forgetting to focus on reducing inequality and injustice in society, even if it comes at a relatively small cost.
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Julian Richer is a retailer, philanthropist and author. With thanks also to Claire Aston, chief executive of Taxwatch
