Tag: ATO cuts

LNP

Tax collection. Now there’s a moral crusade for the Tories . An Urgent advice for Abbott and Hockey which they won’t take. Aiding and abetting crime,

The star chamber is in session. Any foot-draggers in the cabinet are due to be hauled before it if they fail to offer up 25% or even 40% cuts in time for the mass slaughter of the public sector next month. A wail of pleas for mercy has gone up to at least stop shortsighted purging that will end up costing the state more.

The recent cut in teenage pregnancy prevention programmes will add to future spending. Cuts in early mental health treatment will lead to more florid cases arriving in hospital. Cutting home care for the frail will send more into costly care homes. The arts can prove how every £1 the Arts Council spends generates another £2. Everywhere you turn, there are compelling arguments for upfront investment to save money later. But the Treasury is implacable, fingers in ears, sceptical about future savings that have a habit of vanishing into their departments. Myopia is part of Treasury DNA, pessimism about putative paybacks hardwired into its circuit board – now, more than ever.

But the Treasury should heed the voice in its own backyard, Revenue & Customs, which brings in the money, cash in hand, here and now: it could bring in enough to deal with the deficit. The World Bank estimates £70bn a year goes missing in Britain’s shadow economy – and its last report found tax evasion rising.

On average a senior tax inspector on £50,000 brings in about £1.5m, while lower-level inspectors on £25,000 bring in £300,000 each – in all 10 times more than is recouped by Department for Work and Pensions fraud-chasers. Yet Revenue staff have already been cut by a third to 68,000. How can they now lose another 25%? Top brass is fighting hard to resist it, suggesting a state-financed “investment plan” to recover lost funds.

Revenue has been accused of going soft on using the law: the Association of Revenue and Customs union reports HMRC brought 200 cases last year, while the DWP brought 9,000 for considerably less lucrative benefit fraud. Three huge firms recently settled out of court, but critics said all three would have paid more if these cases had proceeded. Each handed over at least £1.25bn in unpaid tax: one had set aside nearly twice as much as a contingency. HMRC settled these cases at the door of the court as they had each already drained £12m from its diminished resources. Now they say only high-risk big businesses are targeted. Overt organised crime such as VAT carousel fraud and carbon-trading fraud have “hoovered up our resources”, so most big evaders are under-scrutinised.
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“There is a tipping point where without enough investigation, more of the fiddlers think they can fiddle more,” senior officials warn Osborne. A culture of honesty soon evaporates without the constant threat of arrest. HMRC tells how a recent crackdown on doctors spread the word fast: 10% came forward and confessed to cheating. Now the HMRC says bluntly: “We need to send more people to jail so people recognise that it is not worth cheating.” The honesty tipping-point comes when too many people know someone who is getting away with cheating: why pay if no one else does? Research shows the deterrent effect: every £1 detected deters another £1 in potential fraud.

HMRC says it needs resources for urgent scrutiny of the wealthy who are converting their income into capital to avoid the 50% income tax rate: City law partners are among the many awaiting investigation. The big four accountancy and consulting firms are still devising avoidance schemes, although they are required to register each new loophole. An honest rich man called a top tax inspector last month to report an approach by a big four firm offering a complex new capital gains tax wheeze involving “rescindable contracts”.

A brisk official call sent the firm into a “flat spin”; it subsequently withdrew it. But the dangerous impression is that the taxman is always a plod behind, short of resources, depending on tip-offs and settling out of court to save money. The National Audit Office’s report says “lack of funding” is preventing efficient debt recovery, with a 17m backlog of PAYE cases. Some £26.1bn is owed in back PAYE, according to tax expert Richard Murphy: “They haven’t enough people to get on the phone and knock on the door to get the money in.”

The Guardian’s Tax Gap report showed the vast scale of corporation tax avoidance. Meanwhile, a meagre 100 HMRC inspectors do their best to police the entire country’s employers for compliance with the minimum wage.

Britain is historically a nation of relatively compliant taxpayers, but that is changing. Lord Oakshott, the Lib Dem Treasury spokesman, told the Lords: “Tax-dodging in Britain is a deep-seated, pervasive, pernicious disease … Highly organised, aggressive, abusive tax avoidance which used to be a marginal and rather spivvy operation, that was frowned on by the main banks and shunned by top accountants and lawyers who were mainly concerned with reputational risk, has now mushroomed out of all recognition.”

He questions why the government is willing to give the big four and City law firms state contracts while they earn fortunes helping to deplete the Treasury. Until its last year Labour turned a blind eye to tax havens and other dodges; can the coalition do better? The BBC’s Robert Peston points out in his blog that the Conservative party is exceptionally beholden to donors from high finance and hedge funds. Sir Philip Green’s bizarre appointment as an anti-waste tsar undermined the coalition’s promise to “actively examine tax avoidance”.

HMRC top brass fear George Osborne needs to prove he is cutting his own department as savagely as all others. But cutting any further on tax collection would show beyond doubt that government cuts are ideological and totemic, and not based on sound economics.

After the Institute for Fiscal Studies showed cuts falling hardest on the poor, the coalition could restore some credibility by ensuring at least that taxes are collected fairly from all, and not just paid by Leona Helmsley’s “little people”. Why not deny state contracts to the consultants who help the wealthy drain the Treasury? And strengthen HMRC so inspectors can put the fear of jail into tax-dodgers. Conservatives could find it easier than Labour to launch an unflinching moral assault on the greedy culture of evasion, avoidance, off-shoring and cheating that has become poisonously socially acceptable.

LNP

Legalized Bribery is not only an American concern. It is equally applicable in Australia and we see it in policy decisions of this government.

LAST Thursday, Sheldon Silver, the speaker of the New York Assembly for the past 20 years, was arrested and charged with mail and wire fraud, extortion and receiving bribes. According to Preet Bharara, the federal prosecutor who brought the charges, the once seemingly untouchable Mr. Silver took millions of dollars for legal work he did not do. In exchange, he used his official power to steer business to a law firm that specialized in getting tax breaks for real estate developers, and he directed state funds to a doctor who referred cases to another law firm that paid Mr. Silver fees.

Albany is reeling, but fighting the kind of corruption that plagues not only New York State but the whole nation isn’t just about getting cuffs on the right guy. As with the recent conviction of the former Virginia governor Bob McDonnell for receiving improper gifts and loans, a fixation on plain graft misses the more pernicious poison that has entered our system.

Corruption exists when institutions and officials charged with serving the public serve their own ends. Under current law, campaign contributions are illegal if there is an explicit quid pro quo, and legal if there isn’t. But legal campaign contributions can be as bad as bribes in creating obligations. The corruption that hides in plain sight is the real threat to our democracy.

Think of campaign contributions as the gateway drug to bribes. In our private financing system, candidates are trained to respond to campaign cash and serve donors’ interests. Politicians are expected to spend half their time talking to funders and to keep them happy. Given this context, it’s not hard to see how a bribery charge can feel like a technical argument instead of a moral one.

The former governor of New York David A. Paterson, for example, said that he had trouble understanding where the criminality lay in the allegation that Mr. Silver accepted payments from law firms for referrals, including referrals by a doctor to whom Mr. Silver funneled state health research funds. Mr. Paterson said, “in the legal profession, people refer business all the time. And theoretically, as a speaker, you could do that as well.”

The legal shades into the illegal. The real estate developers represented by the law firm that allegedly shuttled payments to Mr. Silver for fake legal services were also major campaign contributors. One developer mentioned in the charges gave more than $10 million to political campaigns in the past decade, including $200,000 to Mr. Silver and his political action committees.

The structure of private campaign finance has essentially pre-corrupted our politicians, so that they can’t even recognize explicit bribery because it feels the same as what they do every day. When you spend a lifetime serving campaign donors, it may seem easy to serve them when they come with an outright bribe, because it doesn’t seem that different.

Mr. Silver retained such tight control over budgets and lawmaking in Albany that his staffers were regarded as more powerful than most elected representatives. As a Democrat who cares about education, I can’t say that I loved seeing Mr. Silver, a great public school advocate, in handcuffs. For others, there’s glee in seeing the perp walk. But one high-profile indictment does not represent the dawn of a new democracy.