The labour party has said that it will introduce tougher penalties for tax avoidance if it is elected at the next general election – including fines totalling as much as 100 per cent of the amount avoided.
Under the current tax avoidance rules those found to have abusive tax arrangements are made to pay back the tax they owe.
But under labours new proposals they would be liable to pay this amount as well as a fine totalling the same amount again.
The collation government has already introduced the general anti-abuse rule (GAAR), which came into force in July 2013. It is designed to “deter taxpayers from entering into abusive arrangements, and to deter would-be promoters from promoting such arrangements”.
The currents rules are a broad set of principles aimed at preventing tax avoidance, rather having to constantly update legislation to tackle individual loopholes.
However Labour’s new proposals are more far-reaching and join other commitments by the party to make the increase transparency in the tax system and prevent dormant companies from trading without paying tax.
Shadow Chancellor of the Exchequer, Ed Balls, 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.”
High profile tax avoidance cases involving celebrities like Gary Barlow and Jimmy Carr, as well as a growth in the UK’s Tax Gap – the difference between the amount of tax owed and the amount collected – which increased to £34bn in the year to April 2013, have prompted politicians from all sides to call for tougher measures.
