tax

HMRC fraud team’s civil inquiries fall by half over five years

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Original article by Ed Siddons republished from The Bureau of Investigative Journalism under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

The number of civil tax avoidance leads looked into by HMRC’s Fraud Investigation Service has fallen by almost half in five years, while the number of civil cases it has formally opened has decreased by more than a quarter.

These figures, obtained by the Bureau of Investigative Journalism (TBIJ) under Freedom of Information laws, raise questions about the tax authority’s performance since the start of the pandemic.

The findings follow revelations by TBIJ and the Observer in September that prosecutions following HMRC investigations plummeted by two thirds in five years. TBIJ then revealed in January that HMRC has not charged a single company under a landmark 2017 law to clamp down on corporate tax evasion.

The new figures suggest that the tax authority’s civil enforcement has also declined alongside its use of criminal powers.

Margaret Hodge MP called on HMRC to “finally crack down on egregious tax avoidance and collect the revenues we desperately need”.

In the tax year of 2018/19, HMRC’s Fraud Investigation Service opened 37,273 “risks”, a term used to describe a preliminary inquiry into suspected error or false declaration. In 2022/23, that figure fell to just 21,338 – a 43% decline in five years.

The number of civil cases that were formally opened fell by 28% in the same period, from 17,424 to 12,585.

More from this projectJust 11 ‘wealthy’ people prosecuted for tax fraud last yearNot a single company charged with tax evasion under stronger HMRC powers

“The new revelations that HMRC is failing to make up for [declining numbers of criminal prosecutions] by undertaking more civil investigations is just disgraceful,” said Hodge. “These consecutive failures mean tax dodgers and their enablers can continue getting away scot-free.”

Stephen Daly, senior lecturer in corporate law at King’s College London, said: “[The number of] investigations has fallen off a cliff, and that can’t be good … If you don’t enforce the rules, then you create a culture in which people don’t have to worry about their tax returns later being checked.”

Civil inquiries and investigations declined sharply in 2020, when the Covid-19 pandemic interrupted HMRC’s enforcement activity. But despite a significant rise last year, the number of cases remains well below pre-pandemic levels. “If, in fact, this isn’t explained by Covid, then it’s unacceptable,” said Daly.

A HMRC spokesperson told TBIJ that figures relating to its Fraud Investigation Service “do not take account of our overall compliance activity”, including 300,000 interventions opened in 2022/23. They said the authority has recouped £136bn from compliance interventions since 2018/19.

Easy targets?

As well as the general decline in civil cases opened by HMRC’s fraud unit, the number opened by its team for investigating offshore, corporate and wealthy taxpayers has fallen especially steeply, by 56% in five years.

“Even when [HMRC is] opening civil cases, they appear to be going after the easier, lower value targets,” said Fiona Fernie, a partner at tax advisory firm Blick Rothenberg.

Last year, HMRC reached one of its highest ever tax settlements when former F1 mogul Bernie Ecclestone paid £650m after pleading guilty to tax fraud – but that success was “the exception, not the rule”, said Fernie.

Part of the problem is that the UK has an increasingly complex tax code, which makes enforcement action difficult, she said. “The staff are under considerable pressure, we get an increasingly complicated system every year, [and] it’s very difficult to get anybody to keep up with it.”

Robert Palmer, executive director of Tax Justice UK, said another issue was lack of resources. “We know HMRC is underfunded and resources have been diverted for work on Covid and Brexit,” he said.

HMRC estimates that it collects 95% of all the tax owed in the UK, a proportion it says has remained stable in recent years. However, it estimates that the remaining 5% still accounts for about £36bn.

“Parliamentary research shows that when the government invests in HMRC, the return on investment is significant. Until the department is properly funded, vast sums of money owed, often by the richest people and companies, will go unrecovered,” said Palmer.

The Public Accounts Committee last year found that for every £1 spent on compliance, HMRC recovers £18 in additional tax revenue. “The government is missing the opportunity to recover billions in lost revenue by not resourcing compliance,” it said.

Original article by Ed Siddons republished from The Bureau of Investigative Journalism under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Continue ReadingHMRC fraud team’s civil inquiries fall by half over five years

Left Foot Forward

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A selection of articles from the excellent Left Foot Forward blog, this blog’s favourite blog ;)

NHS waiting lists increase by 400,000 after Rishi Sunak’s pledge to bring them down

“He can’t pull the wool over people’s eyes by claiming it’s down to strike action. Patients, staff and the public deserve better.”

Voters prefer spending on public services over tax cuts, poll finds

Sadiq Khan perfectly sums up why Brexit has been a failure for London

Environmental campaigners hold protest in Brighton, calling for immediate end to sewage dumping

Crowdfunder urging UK government to halt arms sales to groups actively engaged in warfare gains momentum

More

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In 41 US States, Richest 1% Pay Lower Tax Rates Than Everyone Else

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Original article by JAKE JOHNSON republished from Common Dreams under Creative Commons (CC BY-NC-ND 3.0). 

Protesters are pictured spelling out #TaxTheRich at Times Square on March 4, 2021. (Photo: Erik McGregor/LightRocket via Getty Images)

“Almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that.”

Nearly every state and local tax system in the U.S. is fueling the nation’s inequality crisis by forcing lower- and middle-class families to contribute a larger share of their incomes than their rich counterparts, according to a new study published Tuesday.

Titled Who Pays?, the analysis by the Institute on Taxation and Economic Policy (ITEP) examines in detail the tax systems of all 50 U.S. states, including the rates paid by different income segments.

In 41 states, ITEP found, the richest 1% are taxed at a lower rate than any other income group. Forty-six states tax the top 1% at a lower rate than middle-income families.

“When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least,” said ITEP research director Carl Davis. “And yet when we look around the country, the vast majority of states have tax systems that do just that.”

“There’s an alarming gap here between what the public wants and what state lawmakers have delivered,” Davis added.

In recent years, dozens of states across the U.S. have launched what the Center on Budget and Policy Priorities recently called a “tax-cutting spree,” permanently slashing tax rates for corporations and the wealthy during a pandemic that saw billionaire wealth skyrocket and company profits soar.

A report released last week, as Common Dreamsreported, showed ultra-rich Americans are currently sitting on $8.5 trillion in untaxed assets.

According to ITEP’s new study, tax systems in just six states—California, Maine, Minnesota, New Jersey, New York, and Vermont—and the District of Columbia are progressive, helping to reduce the chasm between rich taxpayers and other residents.

Massachusetts, which has one of the more equitable tax systems in the nation, collected $1.5 billion in revenue last year thanks to its recently enacted millionaires tax, a measure that improved the state’s ranking by 10 spots in ITEP’s Tax Inequality Index. Minnesota has also ramped up its taxes on the rich over the past several years while expanding benefits for lower-income families, ITEP’s study observes.

“The regressive state tax laws we see today are a policy choice, and it’s clear there are better choices available to lawmakers.”

But the full picture of U.S. state and local systems is grim. In 44 states, tax laws “worsen income inequality by making incomes more unequal after collecting state and local taxes,” ITEP found.

Florida has the most regressive tax code in the U.S., with the richest 1% paying a mere 2.7% tax rate while the poorest 20% pay 13.2%.

Florida is among the U.S. states that don’t have personal income taxes, which forces them to rely on consumption and property taxes that are “nearly always regressive,” ITEP notes in the new analysis.

“Eight of the 10 most regressive tax systems—Florida, Washington, Tennessee, Nevada, South Dakota, Texas, Arkansas, and Louisiana—rely heavily on regressive sales and excise taxes,” the study says. “As a group, these eight states derive 52% of their tax revenue from these taxes, compared to the national average of 34%.”

Aidan Davis, ITEP’s state policy director, said that “we’ve seen a lot of states shift their tax systems to become even more regressive in recent years by enacting deep tax cuts for the wealthiest.”

The report points to Kentucky’s adoption of a flat tax and repeated corporate tax cuts, which “delivered the largest windfall to families in the upper part of the income scale and have been paid for in part through new or higher sales and excise taxes on a long list of items such as car repairs, parking, moving services, bowling, gym memberships, tobacco, vaping, pet care, and ride-share rides.”

Davis said that “we know it doesn’t have to be like this,” arguing there is a “clear path forward for flipping upside-down tax systems and we’ve seen a handful of states come pretty close to pulling it off.”

“The regressive state tax laws we see today are a policy choice,” said Davis, “and it’s clear there are better choices available to lawmakers.”

Original article by JAKE JOHNSON republished from Common Dreams under Creative Commons (CC BY-NC-ND 3.0). 

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Continue ReadingIn 41 US States, Richest 1% Pay Lower Tax Rates Than Everyone Else

Keeping 1.5 alive, phasing out fossil fuels and tackling climate inequality must be priorities for COP28 climate talks

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As the COP28 climate talks begin today in Dubai, the Green Party has set out three key demands. They are to ‘keep 1.5 alive’; an agreement on the fair and managed phase-out of all fossil fuels; and measures to address ‘climate inequality.’ Greens are challenging the UK government to lead by example and put into practice policies that will help meet these demands. 

Image of the Green Party's Carla Denyer on BBC Question Time.
Image of the Green Party’s Carla Denyer on BBC Question Time.

Co-leader of the Green Party, Carla Denyer, said:  

“We need to hear a clear unambiguous commitment from the UK government to the 1.5C Paris Agreement target which was signed up to by 196 countries eight years ago at COP21. The government must agree to whatever it takes to get this target back on track. It’s going to require a hugely ambitious strategy, but the massive scaling up of climate action that is now necessary is because of dither and delay by countries like the UK in taking the bold action needed. 

“Another vital outcome of COP28 must be the fair and managed phase-out of all fossil fuels. As one of the rich countries most responsible for the climate crisis, the UK must stand on the side of future generations and those on the front line of climate breakdown and agree to urgently move away from fossil fuels. The UK government must resist pressure from the petrostates and others at COP who wish to continue with business as usual and keep the world hooked on fossil fuels. At home this means leading by example with an immediate end to all new oil and gas licences and a rapid acceleration towards renewable energy. 

“Thirdly, these climate talks must recognise that it is a super-rich elite who are super-heating the planet. The UK government must be willing to challenge the grotesque inequality driving climate breakdown and reform our tax system to make the polluter pay. This means taxing the wealth of the super-rich and introducing a carbon tax on the most polluting corporations and individuals. Such taxes, introduced globally, could generate the funds needed for a generous new Loss and Damage Fund to finance climate action in the poorest countries – those suffering the most from the impacts of climate breakdown but contributing the least to the crisis.” 

Continue ReadingKeeping 1.5 alive, phasing out fossil fuels and tackling climate inequality must be priorities for COP28 climate talks

‘Modest’ wealth tax on richest 0.3% could raise more than £10bn for public services, says TUC

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Abba: Money, Money, Money (“It’s a rich man’s world”.)

https://leftfootforward.org/2023/08/modest-wealth-tax-on-richest-0-3-could-raise-more-than-10bn-for-public-services-says-tuc/

The trade union body has set out options for taxing the small number of individuals with wealth over £3 million, £5 million and £10 million

A modest wealth tax on the richest 140,000 individuals in the country could raise more than £10bn to help pay for public services, according to the Trades Union Congress (TUC).

With the country’s public services in a dire state and with the Tories repeatedly using excuses about not having enough money to invest in them, the TUC has set out a clear plan for how further money could be raised, by taxing the wealthiest 0.3% of the UK population, as it called for a “national conversation about taxing wealth”.

The trade union body has set out options for taxing the small number of individuals with wealth over £3 million, £5 million and £10 million, excluding pensions. It says that the options are illustrative examples of what a wealth tax could look like, using Spain’s existing policy as a potential model.

It proposes the following:

  • A wealth threshold of £3 million with a marginal tax rate of 1.7% would yield £2.7 billion (with the tax payable on wealth above £3 million by 142,000 individuals or 0.27% of adults in the UK)
  • A further wealth threshold of £5 million with a marginal tax rate of 2.1% would yield an additional £3.2 billion (with the tax payable on wealth above £5 million by 48,000 individuals or 0.09% of adults in the UK) 
  • A further wealth threshold of £10 million with a marginal tax rate of 3.5 % would yield an additional £4.6 billion (with the tax payable on wealth above £10 million by 17,000 individuals or 0.02% of adults in the UK).

https://leftfootforward.org/2023/08/modest-wealth-tax-on-richest-0-3-could-raise-more-than-10bn-for-public-services-says-tuc/

Continue Reading‘Modest’ wealth tax on richest 0.3% could raise more than £10bn for public services, says TUC