The £120 billion gap

Submitted by AWL on 18 February, 2015 - 12:21 Author: Rhodri Evans

If you fail to declare something relevant to a benefits claim, you will be pauperised by being cut off benefits.

You may be fined or jailed. 250 people were jailed for benefit fraud in the last year for which we have detailed figures, 2012.

Hundreds of thousands have to appeal to food banks after having benefits cut off, often because of no misdeed at all.

The government estimates benefit fraud at £2 billion a year — and benefits unclaimed by people who find the system to hard to negotiate at £12 billion a year.

The government’s official tax collectors, HMRC, say: “The tax gap for 2011-12 is estimated at £35 billion a year — this is the difference between the amount of tax that should in theory be collected, against what is actually collected. Tax evasion and the hidden economy make up around £10.5 billion”. The HMRC workers’ union PCS estimates tax evasion much higher, at £80 billion a year, and the tax gap at £120 billion.

Evade your tax, and what happens? If you’re unlucky, you may eventually have to pay it. But HMRC says claims only 540 people were convicted of tax evasion in 2012-13 — many fewer than the 6,000 who were sentenced for benefit fraud.

The Guardian reports that in the HSBC case: “The UK has recovered just £135m from a list of 6,000 clients in a series of secret deals that kept names out of the public domain. Many evaders were offered light penalties of only 10% of tax due, plus immunity from prosecution... Only one individual has faced prosecution”.

Behind outrightly illegal tax evasion stands a greater bulk of tax avoidance — bending, rather than breaking, tax rules.

Over a third of all world trade is within TNCs. That gives them enormous scope to manage their affairs so that their profits appear, and are taxed, in the lowest-tax parts of the world.

Starbucks, Google, and Amazon all use this scope so as to pay very little tax in the UK.

Law professor Sol Picciotto argues that each transnational corporation should have to draw up a single worldwide set of accounts for its whole business.

Tax on the TNC in each country would be based on its worldwide accounts and the percentage of its operations attributed to the country.

Bill Black is a US law professor who worked as a regulator during the USA’s Savings and Loans crisis of the late 1980s and 1990s — the biggest mortgage-finance scandal and crash before the “subprime crisis” of 2006-8 which triggered the global financial crash of 2008.

He sums up the current scandal thus: “Taxes were once termed the price we paid for civilisation, but they now represent the price the wealthy brag to each other about refusing to pay as they pillage civilisation”.

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