David Gauke's comments at ARC "Tax Myths"event

Attending the “Top Tax Myths” event, hosted by ARC, David Gauke MP, Financial Secretary to the Treasury responded to opening comments by ARC, the Low Income Tax Reform Group, CBI and ActionAid.

Without setting out the detail of those opening comments, here are the key points from his response.

• HMRC does need to be properly resourced. It is worth looking at the record. HMRC responded well to a challenge in 2010 to improve yield. It is clear that the trend in the tax gap is downward.
• HMRC has been successful in doing something about tax avoidance and evasion, and that with a falling budget.
• Customer service remains a challenge, but in recent weeks it has improved. This needs to be sustainable. It’s not just about throwing money at it. HMRC receives 40 million calls a year. Increased use of digital technology will very substantially bring that 40 million down.
• The challenge for policy makers is that the low paid are often at the crossover between the tax and benefits systems. This leads to complexity.
• Addressing the tax myth that business with an effective tax rate below the statutory tax rate are doing something wrong, he agreed that they are not, necessarily. He then joked that there is another myth that the statutory rate should apply to turnover. [I do hope I didn’t sense any nervous laughter in the room from any who didn’t get the joke here]
• Reliefs and allowance are sometimes abused, but having an ETR below the statutory rate does not mean that this is happening. There are perfectly good reasons why this can be the case.
• Businesses need to get better at explaining the tax they pay. This will deal with some of the myths.
• On tax competition, we do have to live with the world as it is, and attract investment to the UK. There are challenges due to distortive effects of CT, which is not necessarily best way to collect taxes. However, people have talked about the death of CT for decades, but it is still here. CT harms investment and productivity and makes us all poorer. So it is right to reduce the rate. It has a benefit for the economy and attracts investment.
• We should assist developing countries in terms of capacity building. Developing countries may need to broaden their tax base, but not UK government’s position to tell them about tax policy. DFID does excellent work in helping developing countries.

I’m not sure this really dispelled many myths. However, it was good to hear a few clear statements from government, and a call for some myth busting!