By Andrew Saunders Thursday, 31 January 2013

Tax evaders cost £5.2bn according to, er, Oxfam

Illegal tax evasion by wealthy individuals is costing the UK Treasury no less than a whopping £5.2bn, according to famine relief charity Oxfam...

That’s a lot of money for sure - there are any number of productive ways it could be spent - how about tax relief for small businesses for starters? And it only covers the strictly illegal practise of tax evasion, the secretive stashing of dosh in offshore havens where the tax man can’t find it. Corporate tax avoidance - a la Starbucks, Google, Amazon et al - may also be controversial but possesses the important distinction of being entirely legal. 

Coming as it does on deadline day for the completion of tax returns, the story is doubtless intended to remind all those law-abiding citizens of the squeezed middle that there are still those who subscribe to the late Leonora Helmsley’s dictum that ‘Taxes are for the little people.’  

Of course the government has pledged to do something about exactly this kind of tax avoidance, with both chief treasury secretary Danny Alexander and PM David Cameron making threatening noises along the lines of ‘we’re coming to get you.’ So that’s alright then.  

Information on exactly how much money they intend to raise this way, or indeed how they are going to raise it, is however rather thin on the ground. Perhaps because they, better than anyone, know that in a scrap between the thinned ranks of HMRC’s finest and the kind of platinum-plated lawyers and accountants that the super-rich can afford there is only ever likely to be one winner. 

But what have the tax affairs of the super-rich got to do with a charity best known for its work on hunger in Africa, anyway? Well, since the wheels fell off the financial system a few years ago, Oxfam (and many other charities in the same field to be fair) have found good business rather closer to home.  

220,000 Brits used foodbanks last year, and last week saw the launch of a new campaign by a 100 charity consortium called Enough Food IF, centred on calls to tackle global tax avoidance to help relieve hunger. So there is more of a connection than you might think.   

Whatever the numbers, it’s hard to disagree that tax avoidance sticks in the craw when we’re all being asked to pull together and share the pain of austerity. But behind the clear air of this moral high ground lies a murky and treacherous swamp of practical difficulties where the unwary can easily find themselves up to their necks in it.   

The brutal truth about tax avoidance is that whilst it is clearly illegal and immoral, it is also very hard to stop. The idea that it’s a just matter of sufficient political will to recover all or even most of this £5.2bn simply isn’t true.  

The law of diminishing returns applies here - the more you spend on chasing tax avoiders, the less additional revenue you raise.  The forces of righteousness ridiculously outgunned, as we have already seen, and even if they were not, wealth is highly mobile these days. The warriors of the dark side can simply hop into their Lear jets and move themselves and their millions somewhere more amenable.  

Of course we may decide that the loss of such individuals is a price worth paying, but it doesn’t alter the fact that getting dedicated tax evaders to pay what they owe is nothing like as quick or easy as it sounds.

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