Zero tolerance: Labour vows to tackle tax avoidance and inequality

Harsh penalties will be enforced on multinationals and top earners that engage in aggressive tax dodging should Labour secure victory in the upcoming general election. The party has also vowed to tackle so-called ‘zero-hours’ contracts.

Following a pledge by Labour leader Ed Miliband to counter “powerful vested interests” in Britain’s banking and energy sectors, Shadow Chancellor Ed Balls confirmed he would impose hefty fines on opportunistic actors who flout new regulations designed to clamp down on tax dodging.

Such fines could parallel the full amount tax evaders attempt to dodge.

Balls acknowledged a clear appetite for Labour to address a “small minority” of benefits cheats in Britain, but suggested public desire was mounting for the party to take a tough stance on firms and individuals who “evade or aggressively avoid the taxes they should rightly pay.”

The announcement, which surfaced in the shadow chancellor’s blog, is an extension of Miliband’s revived campaign to challenge a revolving-door system that breeds inequality.

The campaign has gained momentum following harsh criticism of Miliband’s leadership qualities in the count-down to May’s general election.

‘Zero-zero economy’

In a pre-electoral bid to bolster Labour’s leverage ahead of the vote, Miliband said his plans to crack down on tax avoidance formed part of an overall strategy to reform of a system characterized by gross inequality, tax dodging and zero-hours contracts.

The Labour chief said an epidemic of low wage, casual contracts, in tandem with the nation’s wealthiest earners paying virtually no tax, amounted to a “zero-zero economy.”

He told supporters that a Labour government would strive to eradicate the corrosive effects of this toxic combination should the party score a victory in the general election.

“People [are] asking why they are on zero-hours contracts while some of those at the top get away with paying zero tax. The zero-zero economy we need to change,” he said.

Miliband made the comments in a public address at the University of London’s Senate House on Wednesday, suggesting “powerful forces” at loggerheads with his proposed reforms, were plotting to prevent his entry to Downing Street.

Despite the fact his personal ratings have plummeted to an all-time low this week, aides suggest the Labour chief's speech in London has renewed public confidence in his capacity to lead the party.

Loopholes and lax regulation

Chancellor of the Exchequer George Osborne unveiled the General Anti-Abuse Rule (GAAR) during the coalition’s 2012 budget. The regulation was supposedly introduced as part of the coalition’s strategy for tackling and managing the risks of tax avoidance.

At the time, Osborne scathingly described aggressive tax avoidance and evasion as “morally repugnant.”

His condemnation of tax dodgers proved hollow, however, with the Conservatives subsequently overseeing policy changes that made it easier for companies based in Britain to take advantage of tax havens.

In recent times, the government has altered the UK’s corporation tax law so that firms located in Britain are only liable for tax on income generated in the UK, while income earned elsewhere remains tax free.

To compound matters, it has purposefully created a loophole called the ‘Patent Box’ that has been denounced by the EU as an aggressive tax avoidance tool.

When speaking previously to RT, global tax expert and UK economist Richard Murphy said he holds little hope for a tangible tax policy shift under the current coalition. But whether a newly elected Labour government would deliver on their pre-electoral promises is a matter of conjecture.