As the general election campaign heats up, both the Conservatives and Labour have made bold pledges to crack down on tax avoidance schemes and raise billions in extra revenue. The Tories say they’ll recover £6 billion by closing tax loopholes, while Labour has promised an ambitious £5 billion tax avoidance crackdown move.
For many in the compliance world, these campaign trail promises are being met with cautious optimism and more than a tinge of scepticism. We’ve heard political parties talk tough on tax dodgers in the past, only to see little meaningful action once in power.
Whichever party wins the July 7th poll, they must move swiftly in translating their anti-avoidance rhetoric into concrete policy changes and bolstered enforcement measures. For too long now, unscrupulous operators have been exploiting loopholes and skirting regulations, depriving the Treasury of much-needed revenue.
Today, there is a “breeding ground” of dubious avoidance schemes festering in the umbrella company industry. Umbrella companies hiring contractors often tout schemes promising workers higher take-home pay through “disguised remuneration” but the reality is that these are too often just thinly veiled tax avoidance setups duping workers illegally.
We want to see the next government take decisive action with stringent penalties and enhanced enforcement efforts targeting those orchestrating tax avoidance rackets.
But, enforcement alone is not enough and I would like to see our new Government setting up a dedicated working group bringing together umbrella industry experts, policymakers, and other key stakeholders. This collaborative approach would not only help to design smart, practical solutions and policies but also build trust and buy-in from legitimate businesses in the sector committed to following the rules.
Together, the working group could identify and address the root causes of non-compliance, promoting transparent and ethical practices that level the playing field for all businesses. This approach not only protects workers from being unwittingly ensnared in illicit tax avoidance schemes but also ensures that ethical businesses are not disadvantaged by those seeking to gain an unfair advantage through dubious means.
By fostering a culture of compliance through a collegiate approach, I believe the root causes of non-compliance can be addressed while raising standards and transparency sector-wide. It’s a carrot-and-stick approach – levelling tough penalties for unscrupulous operators, while also extending an olive branch to ethical companies wanting to get it right.
I want a firm commitment to transparency, collaboration, and decisive action from the next government that goes beyond the usual election posturing on this issue.
The road ahead will not be easy but we must be focused and determined to work together to turn the tide and create a more equitable and sustainable economic landscape.
It’s an open question as to whether the Conservatives or Labour will truly prioritise this issue if victorious on July 7th. Whoever is in Number 10 in a matter of weeks, they must deliver on their campaign trail pledge and stamp out tax avoidance once and for all otherwise they will have broken their promise from the outset and that does not bode well for the future.
