If anything good can come from the pandemic, it’s a loud call for tax justice.
A new study from Warwick University and the London School of Economics shows that a tenth of Britain’s wealthiest people are paying a lower rate of tax than someone earning just £15,000 a year.
That’s a shocking statistic; however, perhaps even worse is the fact that the average person with £10 million in total remuneration had an effective tax rate of just 21 percent – that’s less than someone on median earnings of £30,000.
Though disheartening, the conclusions of the study are not unexpected; the UK has, for a long time, been committed to a dysfunctional and damaging approach to tax.
Specifically, tax avoidance and tax evasion are rife, wealth is chronically under-taxed and we don’t raise anywhere near enough money (despite progress, estimates suggest that £35 billion to £90 billion of tax goes uncollected annually). This has led to a disproportionately high tax burden being placed on the poor, the chronic underfunding of public services and lends support to the bogus narrative that we need to implement severe austerity measures.
However, the damage done by the UK’s approach to tax isn’t limited to nationals. Through reliefs and loopholes, the UK also contributes to a broken international tax system, which deprives other countries – in particular, those in the Global South – of revenue. Using loopholes – such as exemptions on Capital Gains Taxes (CGT) on sales of assets in the Global South – as well as tax treaty abuses, some of the world’s poorest countries frequently see their wealth flow to one of the richest.
Because of these and other issues, most people understand that our current approach to tax is problematic. In fact, in a survey by Church Action on Tax Justice, 80 percent of 1,000 working age adults thought that tax avoidance was morally wrong. This belief was held right across the political spectrum.
Because such a high percentage of Britons hold similar views when it comes to tax, it should be possible to effect meaningful change. Today, in the midst of the coronavirus pandemic, we need this change more than ever; if the current crisis has made anything clear, it’s that we need strong public services – and particularly a strong health service.
Unfortunately, the unprecedented strain of Covid-19 has revealed how years of underfunding and marketisation has weakened the NHS’s ability to cope with a true health crisis. Indeed, although it’s hard to calculate the exact impact these issues have had on the NHS’s ability to cope, underfunding and marketisation have undoubtedly cost lives. (This is also a global trend, as the marketisation of health services feature heavily in the World Bank’s promoted private sector health strategies, often via public-private partnerships).
Against this backdrop, it can become difficult to take the Government’s calls for unity and togetherness in the face of Covid-19 seriously.
At the same time as allowing notorious tax avoiding companies to benefit from the furlough scheme, the Government has awarded many of our most vulnerable people – our cleaners, delivery drivers, retail workers, etc. – the bittersweet label of “key worker” and has asked them to continue working on the front lines (often for as little as £8.72 an hour).
If we can ask this of some of our most vulnerable, then we can certainly ask our most privileged to pay their fair share. In a post-coronavirus world, we simply cannot continue to accept losing vast amounts of money to tax evasion and tax avoidance.
For a start, it’s time to stop the very rich from reducing their taxes by structuring their affairs to take their remuneration as capital gains and corporate dividends. If we did just this, researchers estimate that up to £20 billion in extra tax could be raised annually – money which would go a long way toward properly funding the NHS.
If, on top of this, we were also able to collect some of the £35 billion to £90 billion that HRMC loses to tax dodging every year, we could begin to properly fund other important public services upon which our most vulnerable depend, such as social care, housing and community services.
If anything good can come from the pandemic, perhaps it’s a loud call for tax justice – such as implementing proposals for tax reform in post-pandemic Britain.
Want to learn how the rich avoid paying their fair share? Check out the video below.