Labour accuses Government of 'dragging its feet' over efforts to tackle tax avoidance

Labour has today (Thursday) called on the Government to stop “dragging its feet” over promised measures to clamp down on tax avoidance.

In the March Budget, the Government promised to introduce new legislation to tackle the promoters of tax avoidance as part of the now delayed Finance Bill 2020-21. It also pledged to bring forward further measures in the Autumn Budget, which has since been scrapped.

Despite these pledges, Treasury minsters refused to commit to a timetable for reintroducing these key announcements and legislative measures earlier this week. Responding to questions from Labour in the House of Commons on Tuesday, ministers instead simply said they would be making further announcements ‘shortly’.

Following this exchange, Shadow Financial Secretary to the Treasury James Murray MP has today written to his opposite number, Jesse Norman MP, asking him again to set out clearly when the promised anti-avoidance legislation and additional measures would become law.

The letter asks Norman to confirm:

• Whether draft anti-avoidance legislation published in July for this year’s Finance Bill will be included in next year’s instead.
• When the further measures to tackle promoters of tax avoidance schemes promised this autumn will be published.
• What draft legislation on these further measures will be published, and what Bill will turn them into law.

The delays in implementing this legislation echo previous delays in reforming the law over corporate liability for economic crime.

The Government first said it would look into the issue of corporate liability in 2014, but it took until 2017 to issue a call for evidence, and a further three years to respond. The Government then asked the Law Commission to produce an options report, which means there will be no law reform before 2023 at the earliest.

James Murray MP, Labour’s Shadow Financial Secretary to the Treasury, said:

“The Government promised to crack down on promoters of tax avoidance this year – but now all their pledges have been dropped from 2020, with no guarantee of when we’ll see them return.

“It’s irresponsible for the Government to keep dragging its feet on such a key issue. Everyone should play by the rules and pay their fair share of tax. The fact this Chancellor is pushing ahead with a key worker pay freeze while going soft on tax avoidance makes you wonder about his priorities.”

Ends

Notes to Editors

• The Government announced initial steps to tackle the promoters of tax avoidance at the Budget on 11 March 2020 and published the necessary legislation in draft on 21 July 2020. This was intended to be part of the Finance Bill 2020-21, but this has now been delayed and the Government say the final contents of its replacement Finance Bill 2021 will be subject to confirmation at Budget 2021.

https://www.gov.uk/government/collections/finance-bill-2021

• A Government strategy on tackling promoters of tax avoidance published on 19 March 2020 promised that further measures would be announced at Autumn Budget 2020. The Autumn Budget has since been cancelled.
  https://www.gov.uk/government/publications/tackling-promoters-of-mass-marketed-tax-avoidance-schemes/tackling-promoters-of-mass-marketed-tax-avoidance-schemes
• At Treasury Questions on Tuesday 1 December, the Shadow Financial Secretary to the Treasury James Murray MP asked:

Following the Loan Charge Review, in March the Government promised this year would bring both legislation and the announcement of additional policy measures against those who promote tax avoidance schemes. As neither have happened, can the Minister confirm when all these changes will become law?

• Jesse Norman MP, Financial Secretary to the Treasury Jesse Normal MP replied:

“We will be making an announcement about the response to the Sir Amyas Morse (Loan Charge) Review shortly.”

• In December 2014 the Government’s ‘UK Anti-Corruption Plan’ first committed to looking into the issue of corporate liability for economic crime:

https://www.gov.uk/government/publications/uk-anti-corruption-plan

• A call for evidence on ‘Corporate Liability for Economic Crime’ was launched on 13 January 2017 and the Government’s response published 3 November 2020. The Law Commission is now aiming to produce an ‘options paper’ in late 2021:

https://www.lawcom.gov.uk/law-commission-begins-project-on-corporate-criminal-liability

• Letter from James Murray MP to Jesse Norman MP, 3 December 2020

Dear Jesse

I am writing, further to my question to you in the House of Commons on 1 December, about my concerns that the Government is delaying much-needed action to tackle the promoters of tax avoidance.

At the Budget on 11 March, the Government announced initial steps it would be taking to tackle the promoters of tax avoidance, and the necessary legislation was published in draft on 21 July. This was intended to be part of the Finance Bill 2020-21, though of course that Bill has now been delayed. It now seems uncertain whether the legislation will be included in the Finance Bill 2021, with the Government making clear the contents of that Bill will be subject to confirmation at Budget 2021.

Furthermore, a Government strategy on tackling promoters of tax avoidance published on 19 March promised that further measures, beyond those published in July, would be announced at Autumn Budget this year.

However, with the Autumn Budget now cancelled, you confirmed in a Written Ministerial Statement on 12 November that these proposals will now not be published this year. Instead, your statement suggests their detail will be set out and consulted on sometime next year, and you give no indication of when the subsequent legislation might be enacted.

I would therefore be grateful if you could confirm:

1. Whether the draft anti-avoidance legislation published on 21 July 2020 will form part of the Finance Bill 2021?
2. When the further measures to tackle promoters of tax avoidance first promised in ‘Tackling promoters of mass-marketed tax avoidance schemes’ (published 19 March 2020), and referred to again in your Written Ministerial Statement of 12 November 2020, will be published in full and consulted on?
3. When you expected the draft legislation on these further measures will be published, and through which Bill you expect the necessary legislation to become law?

When I raised these points with you in the House of Commons on 1 December, you did not respond in full, but rather promised the Government would be making a further announcement ‘shortly’. I would however, welcome your response to the specific points above ahead of that further announcement, or alternatively your commitment to a date by which a further announcement will be made and a guarantee that this will include specific answers to the points above.

The delays in implementing legislation around the promoters of tax avoidance worryingly echo the Government’s delay in reforming the law over corporate liability for economic crime. In that case, the Government first said it would look into corporate liability in 2014, then taking until 2017 to issue a call for evidence, and a further three years to respond.

In its response to the call for evidence on corporate liability, published earlier this month, the Government asked the Law Commission to produce an options report. This means there will be no realistic prospect of law reform before 2023 at the very earliest: nearly a decade since the matter was first raised.

People in this country expect everyone to play fair and pay the tax they should. They want the Government to act, without delay, against those who promote tax avoidance schemes, and who routinely mislead otherwise law-abiding taxpayers.

I am concerned the Government’s delay means people may be left at risk of serious personal financial difficulty, and means the public finances may continue to miss out on billions of pounds a year. I would therefore be grateful for your response to my above questions about the implementation of measures on this important matter.

Yours sincerely

James