To support the tax and spending pledges made within its main manifesto, the Labour Party also published a separate (but linked) document to its manifesto titled Labour’s tax transparency and enforcement programme. The party claims that the programme ‘will be the most comprehensive effort ever made by any UK government to end the social scourge of tax avoidance’ while ensuring that high net worth individuals and corporations ‘pay their fair share’ of tax.
By reversing cuts to HMRC budgets and restoring staffing numbers within the organisation, Labour argues that it can raise an additional £6.5 - £8.5 billion in tax revenues. However the same document is quick to point out estimates from HMRC that the overall tax gap, ‘some of which is due to tax avoidance and evasion’ is somewhere in the region of £36 billion.
The measures proposed by Labour to address the tax gap include:
Directly costed measures
- Restore preferred creditor status for HMRC to ensure that less tax is written off and remove the scope for tax avoidance (estimated to raise between £1 –£1.5 billion annually)
- Increasing the headline rate of corporation tax to reduce the incentive for individuals to self-incorporate (Raise between £1.7 billion in 2018/19, rising to £2.5 billion by 2020/21)
- Closing the ‘Mayfair Tax’ loophole used to reduce income tax liabilities on equity fund managers (c. £0.7 billion per annum)
- Closing the Eurobond loophole that enables securities listed on the Channel Island Stock Exchange to enjoy exemptions from withholding tax (c. £0.5 billion)
- Clampdown on umbrella agencies used by temporary employment agencies to ‘significantly’ reduce tax liabilities (c. £0.1 billion)
- Investigating and clamping down on the use of Advanced Thin Capitalisation Agreements (ACTA’s) used by large, multi-group companies to reduce their tax liabilities (£0.5 – £1 billion)
Labour have also set out a range of additional measures it says can generate between £2 and £3 billion per year in additional revenue. These measures (not individually costed) include:
- An immediate public inquiry into tax avoidance
- Greater scrutiny of MPs interests to include mandatory publication of all offshore holdings
- Create a specialised tax enforcement unit
- Create a withholding tax for ‘abusive’ tax havens
- Public filing of tax returns for all large companies with Companies House
- Public filing of tax returns for individuals earning more than £1 million per year
- Prevent tax avoiders from being able to access public sector contracts
- Repatriation of contracts awarded to contractors under the Private Finance Initiative (PFI) from offshore tax havens to the UK
- Introduce a register of companies bidding for public sector contracts and procurements to ensure that companies have a permanent establishment and pay taxes on profits made in the UK
- Require disclosure of all company shareholders above a minimal value, instead of only those with shareholdings of more than 25 per cent
- Create a register of trusts highlighting assets and beneficiaries (with a particular focus on trusts transferring the residence of their trustees offshore and those tax avoidance schemes involving trusts disclosed to HMRC under current laws)
- Work with the banking sector to promote good corporate governance
- Introduction of a General Anti-Avoidance Rule to end ‘sham transactions’
- Introduce strict minimum standards for Crown Dependencies and Overseas Territories, including a public register of owners, directors, major shareholders and beneficial owners, in addition to a requirement for companies and limited liability partnerships to publish accounts
- Create an offshore companies levy
- Introduce full country-by-country reporting across international tax jurisdictions.
Read the document here.