The Speaker kindly recognised me at Prime Minister’s Questions today and I asked:
“Does the Prime Minister agree that the way to tackle aggressive tax avoidance is to bring in flatter, fairer taxes?”
“I certainly support flatter, fairer taxes. That is why we have taken 2 million people out of income tax and why we have a lower top rate of tax to make us competitive with the rest of the world. It is important to put it clearly on the record that tax evasion is illegal and wrong, and should be chased down, and that, as my right hon. Friend the Chancellor has said, some of the tax avoidance schemes that have been put in place in recent years are very questionable. The Government should be absolutely clear that the Revenue’s task is to close those schemes down and to ensure that people pay their taxes properly.”
I was delighted to hear that flatter, fairer taxes are still on our agenda, something which George Osborne first put forward when he became Shadow Chancellor in 2005, not least because it is the complexity of our tax system which opens up so many avenues for avoidance, whether “aggressive” or otherwise.
I also suspect that making the tax system simpler with lower rates but fewer exemptions is the only way that we will ultimately stop “aggressive tax avoidance”, since there will be no consensus, let alone definition, of what constitutes “aggressive”, beyond perhaps that Jimmy Carr falls within it.
The Labour government appears to have made a serious mistake by changing the law in 2007 to allow taking loans from a company in such a way as to enable tax avoidance, but it is difficult for any government to avoid such unintended consequences when the tax system is so complex, and surely we do not want to move to a system where “aggressive” or unacceptable tax avoidance (rather than evasion) is whatever the Prime Minister, or the Chancellor, or HMRC determines it to be.