A further debate took place in the House of Commons on 14th November. This time the debate was regarding the leaked Paradise Papers which uncovered tax avoidance on a rather grand scale. It named some of the UK’s most high-profile individuals as having used tax avoidance schemes to stash their cash offshore, with the sole purpose of paying very little tax.
The Government’s campaign against tax avoidance has therefore ramped up a gear, and the story, having attracted so much media attention because of the involvement of such high-profile names, puts even greater pressure on Philip Hammond to take some action to address the debacle on Wednesday.
It’s unsurprising that during a debate over tax avoidance IR35 would get a mention, but this time someone spoke some sense. The uncovering of the Paradise Papers has demonstrated that there are far bigger problems in terms of tax avoidance than IR35. Vincent Cable, Leader of the Liberal Democrats stated;
“At present, a big crackdown is taking place on what are called IR35 companies. These are contractors for the health service, and they are often software specialists. There is undoubtedly a certain amount of tax avoidance in relation to national insurance, but these companies are being pursued in a highly aggressive way that the Government do not use in pursuing much bigger fish…It is the pettiness of such measures, contrasted with what happens on large-scale avoidance, that attracts so much ire and anger from the public.”
What the Paradise Papers have shown is that the Government have far bigger fish to fry and have highlighted the necessity to demonstrate to the nation that action will be taken to put an end to it.
HMRC aggressively target Personal Service Companies and spend a considerable amount of resources to recover what may be thousands of pounds worth of tax from people who are much less able to defend themselves, when they could be focusing on the big corporate companies to reclaim millions of pounds worth of tax in one fell swoop.
In 2013, global firms such as Starbucks, Google and Amazon, were reported in the press as having complex tax arrangements in place in order to pay less tax. At the time, MPs urged the government to name and shame those who didn’t pay their ‘fair share’ of tax but the then Prime Minister, David Cameron, and Chief Secretary to the Treasury, Danny Alexander, failed to take such action, saying that it would breach taxpayer confidentiality.
Perhaps in the wake of the Paradise Papers, Wednesday’s Budget will pay more attention to resolving tax avoidance on a larger scale, but of course we shouldn’t count our pennies before they’re taxed…HMRC may be much more wary of dealing with the big fish, who will undoubtedly have much more legal armour up their sleeves.