Labour Plans Tough Measures for Tax Avoidance

Shadow chancellor Ed Balls has pledged to introduce a “genuine deterrent” for those seeking to aggressively avoid tax, if the Labour Party wins the next general election. On his blog, Balls wrote that the public wants the government to be “tough on companies and individuals who evade or aggressively avoid the taxes they should rightly pay”.

Aggressive avoidance fails to comply with the spirit of the law

Tax avoidance, which unlike tax evasion, is not illegal, has faced increasing criticism over recent years. While tax avoidance complies with the letter of the law, critics say it fails to respect the spirit of it. Various companies and individuals have greatly reduced their tax liabilities through the use of legal tax schemes, with some high profile cases publicised and the ethics of their actions questioned. In July 2013, the Government’s General Anti-Abuse Rule came into force, after Chancellor George Osborne described aggressive tax avoidance as “morally repugnant”. The rule introduced a broad set of principles, which was hoped to alleviate the need for new legislation to tackle the individual loopholes that are exploited. Existing anti-tax avoidance legislation currently requires individuals and companies who have been investigated to pay back the tax they have avoided.However, Balls has criticised the existing measures saying they are too lax, with the anti-abuse rule “lacking teeth”.

Balls to introduce fines of up to 100% of the amount of tax owed

In a statement on his blog, which is intended as a tangible demonstration of Labour’s campaign against vested interests, Balls stated his aim is to introduce tough punitive penalties for those whose tax arrangements are found to be “abusive”, with fines of up to 100% of the amount of tax owed. By introducing a liability for the same amount again, Balls claims a genuine deterrent will be introduced into the system. He said "those who are caught have to repay the tax they tried to avoid, but they do not face a penalty. There is still no disincentive to try and game the system. That is why Labour will bring in a tough penalty regime…with fines of up to 100% of the value of the tax which was avoided.”"For the first time this will provide a tough and genuine deterrent to those who try to abuse the system and avoid paying their fair share of tax."The shadow chancellor also said that those who aggressively avoid tax should be viewed in the same way as those that cheat the welfare system. He said that the Government could no longer ignore the legitimate concerns of the general population, and that Labour was seeking to establish more balance in society. He wrote “Ed Miliband and I want big changes to create an economy that works for working people and a recovery for the many, not just a few.”A Conservative spokesman has dismissed Balls’ proposals as "feeble stuff". Adding that “Ed Miliband was at the heart of Gordon Brown’s Treasury, as year after year they broke their promises to deal with tax avoidance”, the spokesman accused Labour of not having a coherent economic plan.For advice on how best to manage your assets or how the existing tax legislation could affect you or your business, contact one of our commercial and corporate solicitors on 01895 207973 or email corporate@ibblaw.co.uk. Our experienced corporate and commercial lawyers in West London are experts in all aspects of commercial and corporate law. Our partners are accessible and responsive, taking a proactive approach to business law. Our focus on providing the most current best-practice advice means our team of corporate and commercial lawyers will help you make informed decisions every time. We’re here to offer you expert corporate and commercial legal advice on acquisitions, mergers and disposals, commercial contracts, corporate advisory law, and business structures and joint ventures.