UK Labour Party Wants More Tax Transparency
The UK’s Labour Party announced this week that, if they were in power, wealthy British citizens would be required to make their tax payments public.
Shadow Chancellor John McDonnell said that in an effort to curtail tax avoidance and evasion a Labour government would take a page out of the Scandinavian model and require all individuals making more than one million pounds to publicly disclose their tax payments to Her Majesty’s Revenue & Customs (HMRC).
Figures by HMRC suggest that there are roughly sixteen thousand individuals in the UK who earn more than one million pounds in annual income. These individuals are expected to cough up about 40 percent in tax.
Speaking to The Guardian, McDonnell said, "There is a big issue now about people don't have trust in the establishment – they don't think they're listening to them, don't think they're paying their way or being fair. So one way of re-establishing some element of openness and transparency would be, why not – over a million, you publish your tax return. Why not?"
“I think openness and transparency is the basis of confidence and trust. And what we’ve got in society is a lack of trust, in people who make decisions and people of the establishment. And I think we’ve got to start rebuilding trust in our society. And on the tax evasion, tax avoidance, it would help on that, certainly,” he added.
More specifically, if applied this rule would only affect individuals with incomes greater than the specified amount. Hence, individuals with property or other sources of wealth surpassing one million pounds but accruing an income below this threshold would not be required to publicly disclose their tax payments.
Pros & Cons to Greater Tax Transparency
Nick Mathiason of Finance Uncovered agreed with the Labour Party’s idea, telling The Guardian, “There is, in our view, a clear and substantial public interest in elected representatives fully disclosing their sources of income and their tax payments. Elected representatives are paid by taxpayers to make decisions on taxation and on how our money is spent on behalf of all of us.”
Tax Justice Network’s Alex Cobham also concurred and said, “It’s politicians rather than just the most wealthy we should be interested in. Ultimately we need to be more concerned about potential conflicts of interest, and trust HMRC is doing its job properly for everyone else.”
Tim Worstall, however, thinks requiring these individuals to disclose their tax payments wouldn’t accomplish much.
Writing for Forbes, Worstall says, “You cannot combat tax evasion by looking at tax returns. Because tax evasion is, by definition, the income you do not put on your tax return, the income you do not declare that you have earned.”
Furthermore, he adds, “It's also not true that publishing tax returns would beat tax avoidance. Because tax avoidance is, again by definition, what you're allowed to claim on your tax return in order to reduce your tax bill.”
What do you think of this initiative? Is greater tax transparency, particularly of politicians as in the case of Donald Trump, something absolutely necessary?
Let us know in a comment!