The claim
“We’re also asking wealthy people to pay more tax, we’ve put more resources, a billion pounds more resources, into HMRC’s work on cracking down on tax dodging … to raise an extra £9bn a year by the end of this parliament.”
– Danny Alexander, chief secretary to the Treasury, 22 May 2013
The background
Facing a barrage of criticism over how the government had apparently allowed companies such as Google and Apple to avoid hefty tax bills, the chief secretary to the treasury was quick to point out the coalition’s victories in the war on tax avoidance.
Ed Miliband, the leader of the opposition, had claimed the government was all talk when it came to tax. He even made a direct plea to David Cameron: “I’m saying to him: put your proposals on the table about avoidance, don’t just talk about it.”
While the prime minister’s deputy, Nick Clegg, took on the web giant, Google, over the company’s tax record, both he and David Cameron conceded that further action was needed to tackle the issue.
Mr Alexander went further. “As a coalition, we’ve made big progress on tackling tax evasion and tackling tax avoidance over the last three years,” he said. “I think we’ve done more in these three years than Labour managed in their 13 years in office to make sure people pay their fair share of tax.”
He listed the achievements the coalition had made: “We’re [also] asking wealthy people to pay more tax, we’ve put more resources, a billion pounds more resources, into HMRC’s work on cracking down on tax dodging. That’s going to raise an extra £9 billion a year by the end of this parliament.”
FactCheck’s already had to pull up the government on claims it’s made when it comes to tough talking on tax. What about this time?
The analysis
Are the coalition asking wealthy people to pay more tax? After all, they cut the top rate of tax from 50 to 45p.
According to figures from Revenue and Customs, in 2009-10, the richest 10 per cent were paying 55 per cent of the overall tax share. By 2013-14, they were forecast to be paying 59 per cent.
But that’s a trend that, broadly, has been continuing for the last decade or so. Since around 2000, the share of total tax paid by the richest 10 per cent has generally been increasing from around 50 per cent, by just under a percentage point a year, with one or two blips.
In terms of who bears the greatest brunt of tax changes announced by the coalition, the Institute of Fiscal Studies concluded after the last budget that only those who are in the richest 10 per cent will have lost the most from tax and benefit measures since 2010. The next biggest losers are those on working age benefits, who tend to be poorer.
Has the coalition put £1bn more into cracking down on tax dodging? We’ve FactChecked David Cameron’s claims to have ploughed money – £900m – into the Inland Revenue before, and found they were more avoidance than outright evasion.
The Treasury and the Inland Revenue were more accurate with their descriptions of the money as a “reinvestment”, as the money was actually part of funds which had been taken away under cuts, with £900m of it returned.
When we asked the Treasury how much extra money they have spent on tax avoidance and evasion, they referred us back to the same figure we had before – the £917m, plus another £77m announced in December.
What’s telling is that David Gauke, exchequer secretary, was asked in a parliamentary question in January about how that money was to be spent.
This is the breakdown: just five per cent of it was to go towards cracking down on tax dodging by large businesess and wealthy individuals. Sixty five per cent was to target tax evasion by the “mass market”, and 10 per cent for organised crime. The remaining 20 per cent of the £917m was for debt collection.
So if that’s the bulk of the billion for tax dodging and evasion, FactCheck doesn’t buy it.
And will their measures raise an extra £9bn a year by the end of this parliament?
There’s a bit of small print here which it’s worth pointing out.
This is one headline which emerged after the £917m reinvestment announcement in 2010: “£7billion a year to be raised by targeting tax cheats”.
It’s understandable as to why they said that – when George Osborne announced the cash in the House of Commons, he simply said that it was to bring in “a missing £7bn”.
But both are wrong. What they should add is: “In two years time.”
When we look at how much money has actually been brought in by this £917m reinvestment, current sums are considerably smaller than the headline grabbing £7bn figure: Mr Gauke said in another parliamentary answer that the money had brought in an extra £4bn this year and is expected to bring in £5bn next year.
So, when the Treasury says that it expects the £77m investment to bring in an extra £2bn a year, they mean by 2014-15. This year may be less.
So Mr Alexander has been careful to choose the highest sum available to make his case, and he’s chosen one that can’t be tested because it hasn’t happened yet.
The verdict
Mr Alexander is right when he says the government are asking wealthy people to pay more tax. But given that’s been trend over the last 13 years or so, it would take a lot for this situation to be reversed. It would be an extremely brave move to make the wealthy pay less taxes than they have done previously.
It is, however, misleading to claim that they’ve put a billion pounds into cracking down on tax dodging. We’ve already established, on numerous occassions, that the bulk of that money is actually a cut, though less deep than intended.
And even of that, just five per cent is for tackling wealthy individuals and big businesses – the Googles and Amazons that led to Mr Alexander making the statement in the first place.
Will the government make good on it promise to bring in an extra £9bn a year by tackling tax avoidance in the manner they’ve said they will?
It’s a two year wait for the answer to that one.
