Tax: We're all in this together?

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 | News and analysis

The bailout of the UK banking sector, alongside the global financial crisis, has left the British government facing a massive financial deficit. Rather than attacking public services and public sector workers, the government should instead tackle the deficit and support public services with a progressive tax system based on fairness, to ensure that corporations and the wealthiest in society pay their fair share.

The UK economy is losing £100 billion a year through tax dodging, in the form of uncollected tax, illegal tax evasion and abuse of tax loopholes - which is almost solely the preserve of corporations and the very wealthy. Recovering even half of this sum each year would allow the government to sustain investment in public services rather than its current programme of destroying hundreds of thousands of public sector jobs.

In the briefing 'The Great Tax Parachute', written for the Green New Deal Group, tax expert Richard Murphy sets out exactly how we could look to recoup the revenue that is currently lost in the UK.

An immediate and important step is to freeze the HMRC redundancy programme, which is set to affect tens of thousands of workers - many of them PCS members - who have already seen thousands of jobs in tax collection go. The savings made by these redundancies would be dwarfed by the £3 billion in potential tax collected by tax inspectors. In addition, a government which aggressively and uncompromisingly collects tax – and doesn't tolerate non-payment – could potentially collect billions more than it already does.

Equally important is to make capital pay for the crisis it has caused globally. One tax that War on Want has been campaigning on for many years has come to be known as the Robin Hood Tax. This is a modern version of the Tobin Tax originally envisaged for currency transactions, and could be introduced unilaterally in the UK. It would be a tiny tax of just 0.005% on all sterling foreign exchange transactions, and a similar tax on trades in derivatives, swaps and bonds. Combined with other measures on the table, these taxes could raise up to £20 billion a year in the UK alone.

Under current proposals, half of this revenue would go to support the welfare state in the UK, with the other half going to fight poverty and climate change across the developing world. Alongside this, many developing countries themselves need stronger and better resourced tax systems to be able to fund desperately-needed public services.

Developing countries lose an estimated £250 billion as a direct result of corporate tax dodging. This income could provide vital services like healthcare, education and housing for the very poorest in the world.

The message that paying tax is not optional and that dodging tax is deadly has not been reinforced enough. Lost tax revenue could be used to reach the UN's Millennium Development Goals several times over, while tax avoidance and capital flight cost Africa five times what it receives in aid each year.

The UK is a major facilitator of tax dodging through its tax havens, in places such as Jersey, the Cayman Islands and Bermuda. Equally, the financial industry in the City of London is geared towards helping companies dodge tax overseas. War on Want is calling on the government to ban all British tax havens as a first step towards ending their use across the world.

Also key to making companies pay tax is the creation of a transparent tax system. This is why War on Want is calling for new accounting standards, with company reporting on a country-by-country basis that would open up the tax system, and allow the developing world to properly pursue uncollected tax. Also needed is automatic information exchange between countries so that information on taxation is readily available to governments.

The message then is clear: in place of cuts, we can boost spending through tax, and help to combat global poverty. We need a progressive tax system that will provide for the poor and properly tax the corporations – both here and overseas.