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Shadow Chancellor Rachel Reeves plans a crackdown on tax evasion if Labour wins the election with proceeds to fund more GP and dentist appointments, and schools.
The Labour Party has pledged more funding for schools and the NHS if they are elected, raising a potential £6bn a year by funding HMRC with £555m for more than 5,000 additional tax officers according to Reeves.
The Shadow Chancellor insisted HMRC ‘could ramp it up pretty quickly’ when questioned on the length of time it would take for the tax authority to allocate resources to more tax inspectors. Tightening up the rules on the recent changes to non-dom tax would also be on the agenda for the Labour Party to close the £36bn tax gap.
Reeves told BBC Breakfast: ‘The tax gap at the moment between what we should bring in in tax and what is actually brought in is around £36bn, but the head of the National Audit Office said it is reasonable if you properly resource His Majesties Revenue and Customs it would bring in an additional £6bn, and we’re determined to do that.
‘This is to fund what I believe are the nation’s priorities by cracking down on tax avoidance and making sure the tax code is properly complied with.’
Reeves also brought up the Spring Budget’s non-dom allowance changes, referring to the ‘loopholes’ left in the tax. In the first year of anyone paying this can receive a 50% discount and can additionally avoid inheritance tax. Reeves said: ‘We would abolish that and we would put that money into frontline services where it belongs.’
The Shadow Chancellor was questioned about her ‘good friend and colleague’ Angela Rayner’s tax affairs relating to the sale of a property almost a decade ago. This was described by presenter Jon Kay as ‘awkward for you, coming on to talk about tax avoidance, when at the same time Labour’s deputy leader, Angela Rayner is still facing questions about whether she paid the right amount of tax’.
Reeves replied: ‘This is about what a Labour government would do if we are elected later this year to bring in billions of pounds to properly fund our frontline services, and I think that’s what people want to know.
‘Whether Labour are serious about funding our public services and ensuring people pay their fair share of tax, I am determined to do those two things.’
Nimesh Shah, CEO of Blick Rothenberg said: ‘Labour’s claims of a ten-fold return on investment in additional tax revenue seem incredibly ambitious at a time when HMRC are struggling to answer the phones.
‘Over the last decade, the government has poured record levels of funding into HMRC, as well as increased legislative powers to tackle tax evasion and aggressive tax avoidance. Over the last three years, the Government has announced additional funding to HMRC of £900 million - to support tax compliance efforts, tackle more serious cases of tax fraud and manage tax debts.
‘Despite the increased investment in recent years, the tax gap remains at around 5% - a level which has been broadly maintained since 2017/18. But as tax revenues have increased, the absolute amount of the tax gap at £36 billion has never been higher.
‘The Labour Party have said that they will bolster HMRC compliance officers by 5,000, invest in digitisation and work with businesses and the tax profession to modernise HMRC, including greater use of AI. This all sounds very sensible, but HMRC's customer service and standards are at an all-time low, with regular stories of shutting down phone lines and taxpayers not being able to access the right information. There is significant work to do for HMRC before we can start thinking about raising £5 billion additional tax revenue.’
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