Poor bail out banks and rich keep their billions

Here is my letter to Stroud Life today in response to last week's coverage of the VAT demo in Stroud. I note I also have sent a response to the SNJ as I wanted to make two additional points in response to Neil Carmichael MP.

Firstly the VAT increase is the complete opposite to maintaining 'fairness in the tax system' as Neil Carmichael MP claims the government are interested in - and secondly Neil Carmichael says the government is 'committed to tackling tax avoidance' but where is the evidence? As I note below they are cutting the very staff who do that.

Photo: Zimbabwe 50 trillion dollar note - virtually worthless.

Dear Sir/Madam,

Tax should be fair and for the common good. We cannot claim to extend freedom to all if we do not attend to the needs of all. The Stroud High Street protest highlighted the unjust increase in VAT (Stroud Life 5/01/11). Even David Cameron admits that VAT “hits the poorest the hardest" while the Lib Dem Deputy says "It penalises the poor" (i). Our poorest 20% of households have both the highest overall tax burden and the highest VAT burden (ii).

At the same time as the VAT rise, a new Government report estimates £6.9bn in unpaid corporation tax (iii). Tax Research UK estimate the total tax gap to be at least £120 bn (ie 75% of the deficit)(iv). Rather than employing more people to ensure this tax is paid, the Coalition has announced a 15% cut to the HMRC, resulting in plans to cut 25,000 jobs by 2011. Benefit fraud in contrast amounts to £1.1bn a year (v). Meanwhile the tax rate for large corporation will fall from 28% to 24% (the lowest rate of any major industrialised country). In fact the TUC has found that ‘Effective Tax’ paid by Corporations is actually 7% lower, which means large corporations will pay a tax rate less than small company’s and less than what most of us pay (vi).

The Stroud protest started outside Boots and Stroud Life quote a Boots spokesperson saying: "Alliance Boots group companies are substantial taxpayers in the UK." Yet a recent edition of the BBC's File on 4 found Boots, after relocating to a post office box in Switzerland, has legally cut its tax bill from more than £100m a year to about £14m (vii). Tax Avoidance might be legal, but that doesn’t stop some of us seeing it as immoral. It also costs the rest of us money by shifting the burdens of tax, often, on to those least able to pay.

More than half of world trade now passes through tax havens. More than half of all banking assets and a third of foreign direct investment by multinational corporations are routed offshore and this is growing. For those interested in this come to the Stroud Sub Rooms, at 7.30 on 20th Jan, John Christensen, a former economist at the Treasury, will explain how tax havens in British territories around the world enable massive tax avoidance. We are now living in a country where the three main parties have the poor bail out the banks, while the rich keep their billions intact. This cannot continue.

Cllr Philip Booth, Stroud District councillor for Randwick, Whiteshill and Ruscombe ward (Green party),

Notes:

(i) David Cameron: ‘Cameron Direct’ Exeter event, 8 May 2009 while Simon Hughes, June 14th 2010 is quoted at:
http://liberalconspiracy.org/2010/06/15/watch-simon-hughes-warns-coalition-on-vat-rise/

(ii) Richard Murphy, Tax Research UK, July 12th, 2010. See:
http://www.taxresearch.org.uk/Blog/2010/07/12/is-vat-regressive-and-if-so-why-does-the-ifs-deny-it/

(iii) http://www.bbc.co.uk/news/business-11342237

(iv) Official accounts suggest that the tax gap amounts to £42bn. Richard Murphy of Tax Research has demonstrated that this figure cannot be correct, as it contradicts other government statistics. He estimates that avoidance now amounts to £25bn a year, evasion to £70bn, and outstanding debts to the tax service to £28bn: a total of more than £120bn. See: http://www.taxresearch.org.uk/Blog/2010/06/28/the-tax-gap-why-have-hm-revenue-customs-got-it-so-wrong-and-what-should-be-done-about-it-now/

(v) While the government's new strategy for reducing benefit fraud, according to the Association of Revenue and Customs, is likely to harvest £3 for every £1 it spends; money invested in HMRC to deal with tax avoidance and evasion brings in £60 for every £1 spent.

(vi) TUC’s report on the Corporate Tax Gap. Download at:
http://www.tuc.org.uk/extras/corporatetaxgap.pdf

(vii) See: www.guardian.co.uk/commentisfree/2010/nov/08/businesses-that-dont-like-tax