ARE WE SERIOUS ABOUT TAX FRAUD AND AVOIDANCE?

The country is broke because of a collapse in our national income, which was caused by the collapse of the banking sector.

Although the income of the government collapsed and they had to lend the banks unimaginable amounts of money, the government carried on spending money elsewhere pretty much as it had planned. Of course unemployment has risen and that has meant a bigger bill in JSA and Housing Benefits and the bill for interest of government debt has gone up.

We are not taking in enough money in tax to pay for our outgoings including interest on our loans. There is a tax gap.

What is the tax gap? Well, it has three parts. The first part comprises tax avoidance, which has been estimated at around £25bn a year. Tax avoidance is the exploitation of loopholes in UK tax law and the careful use of tax havens which we have talked about before on Munguin’s Republic. There is absolutely nothing at all that is illegal about using tax havens. They are inefficiencies in the tax law of the country which have been allowed to continue by successive governments who wish to stay friendly with rich people, and in some cases which actually consist of rich people. Several Cabinet Ministers in the present government are reputed to have large amounts of money in the tax haven of the British Virgin Islands (pic rt), including George Osborne (below with David Cameron), none other than the Finance Minister, the International Aid Minister and the English Transport Minister.

The second part is tax evasion. That is the one that is a criminal offence. This has been estimated to be in the region of £70bn a year. That's a lot of money.

HM Revenue & Customs claims it is much less, but they use what many would describe as dubious methods for estimating unpaid tax.

The third part is unpaid and late-paid tax which, for this year may be in the order of £26bn.

If the government is even half way serious about collecting any of this tax, they are going about it in a weird way. Labour has cut and cut and cut again the number of staff in HMRC. 26,000 jobs have gone since 2005 including 5000 last year. This government intends to carry on sacking. This is utter madness. It is estimated that each front line member of staff can bring in as much as 30 times what it costs to pay them, so why, of all the departments to lose staff in, would they choose this one? The result is that tax that is so badly needed to keep services going is being given away.

The coalition keep banging a drum about benefit fraud, which is estimated at somewhere over £1 bn a year. A frightening amount without any doubt. Much more too, is lost because of inefficiencies in the system and staff or systems which make too many mistakes in their calculations.

But still week in week out we hear about ways to reduce this, and the iniquities of benefit thieves. This of course goes down very well with the Daily Mail and the Sun, which big the figures up and fail to point out when the government put the above two together and describe it all as fraud. Nothing like bashing the layabouts!!

The Tory manifesto did not include anything about tax fraud, but as the Liberals’ did, the coalition is promising to “make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals and a review of the taxation of non-domiciled individuals.

In other words ... nothing.

I agree with the efforts being made to ensure that we do not lose more than £1 bn a year in benefit fraud, I’d just be very happy to see the same level of effort going into fraud at a higher level.

Maybe if that happened, we could hope to live for the next 10 years in a little less discomfort than we appear to have coming to us.

Figures estimated by Richard Murphy, director of Tax Research LLP