Labour pledges double penalties for tax avoiders

The Labour party has said if it gets into power next year, tax avoiders will have to pay double what they currently pay.

Current rules mean tax avoiders only need to pay back what they owe to the exchequer – however Labour plans to introduce a “genuine deterrent” by doubling what they have to pay back.

Wealthy people and companies are increasingly using aggressive tax avoidance measures to reduce the amount they pay.

Tax evasion is illegal but tax avoidance is perfectly legal , if not in the spirit of fairness.

Shadow Chancellor Ed Balls said: “Those who are caught have to repay the tax they tried to avoid, but they do not face a penalty. There is still no disincentive to try and game the system. That is why Labour will bring in a tough penalty regime… with fines of up to 100% of the value of the tax which was avoided.

“For the first time this will provide a tough and genuine deterrent to those who try to abuse the system and avoid paying their fair share of tax.”

Tax evasion

Usually involves not disclosing the full amount you earned, or the amount of interest gained on savings in order to lower your tax bill. It’s illegal and can get you a hefty prison sentence. It costs £14bn a year to the economy.

Tax avoidance

Lowering a tax bill by putting money into charities and tax shelter schemes to reduce your gross income.  It’s legal – misters say it involves “compliance with the letter but not the spirit of the law”.

Are these measures fair? Will they help tackle tax avoidance? Tell us on ourFacebook page or in the comments below.


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Readers' comments (1)

  • What an excellent idea! That will make a lot of people think twice.

    Does this mean that Vodafone will now owe the taxpayer £12bn instead of the £6bn they got written off in a dodgy deal with Dave Hartnett?

    As for tax avoidance, if ministers think it complies with the letter but not the spirit of the law, then the law needs changing.

    Simple as that.

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