Tax evasion and tax avoidance – by John Redwood MP

Yesterday during debates on the Finance Bill in the Commons Labour wheeled out their old friends tax evasion and avoidance. They do not like either avoidance or evasion, but they were always with them during their years in charge. They are almost allies, because they allow Labour to work off their prejudices against enterprise and success. They give them an alibi for the deficit. If only, they intone, the Treasury would clamp down effectively on tax evasion and avoidance we would be spared the “cuts”. Let me make it clear before Labour try another of their lies about me that I too condemn tax evasion and wish the tax law to be properly enforced against crooks. Sensible tax planning is a different matter, as Labour only reluctantly accepts.

On Labour MP figures there could be as much as £120 billion of missing tax. The last Labour government was more modest, quantifying it at £40 billion but failing to collect it. After 13 more Labour years of anti avoidance Labour MPs have concluded there is still a bigger than ever golden hoard waiting to be collected by the white knights of the Revenue.

They did not have much of a response when I asked them why they had been unable tocollect this elusive treasure during their 13 years in office. They were even more dismayed when I pointed out that quite a lot of the avoidance was the result of policies the Labour government put in or supported to encourage various types of approved behaviour.

National Savings, for example, sells tax free savings products. Labour always approved of this and sold a large amount of such products to savers who did not want to have to pay tax on the interest on their savings deposits or bonds. This is tax avoidance with a purpose – the purpose of paying more easily for excess government spending.

Then there is the case of the investment allowances against Corporation Tax. Labour was busily defending those from planned reductions. They think it’s a good idea to encourage more investment by offering people a tax break from profits tax for doing so. It’s another type of approved avoidance, which was nonetheless included in the figures they were using for the tax avoidance they needed to clamp down on!

For more of the argument please see the text of my remarks under speeches on this site, to be posted later today.

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