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The National (Scotland)
The National (Scotland)
National
Abbi Garton-Crosbie

Scotland loses out on £3bn a year due to Westminster failure on tax dodgers, SNP say

SCOTLAND is losing out on almost £3 billion each year because of tax avoidance and the Westminster Government’s failure to close legal loopholes, the SNP have claimed.

During an evidence session of Holyrood’s Finance Committee last week, Office for Budget Responsibility (OBR) chief Andy King estimated that around £35 billion a year is lost across the UK as a whole due to tax avoidance.

The SNP calculated that on a population share basis, each adult and child in Scotland is missing out on an estimated £500 each, totalling a whopping £2.835 billion overall.

SNP MSP Kenneth Gibson, convener of Holyrood’s Finance and Public Administration Committee, asked King what “tax take” is lost across the UK as a result of uncollected tax or “avoidance measures”.

King replied: “HMRC’s estimate of the tax gap at the moment is that it is a little more than 5 per cent. However, it varies greatly. It can be as low as 1 per cent in the pay-as-you-earn income tax system, because people do not really have an opportunity to game that system, but it can be as high as 20 per cent in the self-assessment income tax system, where there is much more discretion.”

Gibson asked: “Is that 5 per cent of total tax income or 5 per cent of GDP?”

To which King replied: “The tax take could be around 5 per cent higher if there were no tax avoidance or evasion and no tax gap.”

When Gibson asked what that would equate to in cash terms, King said: “I do not have the number in front of me, but I think that it would be of the order of £35 billion.”

The exchanged followed a query from SNP MSP Michelle Thomson who asked King and Richard Hughes, chair of the OBR, about the cost of money laundering and corruption to the UK’s GDP and its impact on the sustainability of public finances.

Both Hughes and King said the OBR doesn’t take an explicit view on the issue, but that it would likely show up in tax which is “avoided and not paid”.

King added: “Such issues are largely implicit in those places where our forecasts start from: the ONS estimate of GDP and what we actually see in tax revenues. HMRC makes efforts to understand and quantify tax gaps; however, we do not use that information, except where policy measures are taken to close tax gaps, because we forecast how the revenue that we are seeing today will grow as a consequence of growth in tax bases.”

Gibson said the figures “underline how Westminster isn’t working for Scotland”.

He added: “No wonder the UK sits at the bottom of so many economic and social league tables amongst its north west European neighbours.

“The powers to tackle avoidance for almost all taxes, including Income Tax, sit with the Tory Westminster government. The SNP has consistently called for greater tax transparency and stronger action from successive Westminster governments on avoidance but they continue to ignore Scotland.”

Gibson also accused the Westminster Government of “dragging its heels” on dealing with tax avoidance and said some Tory MPs were “actively opposing action”.

He said: “You can but wonder why the Tories are so reluctant to crack down on the predominantly wealthy individuals who avoid paying what they owe.

“The scale of these losses – written off year after year by the Tories – are significant. If this lost revenue was properly collected it would allow the Scottish Government to significantly ease the financial pressures on public services and the NHS.

“Independence offers Scotland the opportunity to take action and ensure a fairer taxation system that benefits the people of Scotland. With the full powers of independence, Scotland can finally develop into a progressive, forward-thinking nation, and a nation with a taxation system that is fair for all.”

The UK Government has been contacted for comment.

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