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Labour to crack down on tax cheats


Labour leader Ed Miliband during his speech to party supporters at the University of London

Labour leader Ed Miliband during his speech to party supporters at the University of London

Labour leader Ed Miliband during his speech to party supporters at the University of London

Labour has unveiled plans to impose big fines on tax cheats as part of Ed Miliband's attack on what he calls a " zero-zero economy" - where workers are stuck on zero-hours contracts while wealthy bosses pay no tax.

In a speech designed to bolster his poor poll ratings after a bruising bout of party in-fighting, Mr Miliband said he would endure whatever was thrown at him for the chance to tackle inequalities as prime minister.

Shadow chancellor Ed Balls said the package of measures would include forcing people caught using aggressive tax avoidance schemes to pay not just the tax they dodged but up to the same sum in sanctions as well.

A new general anti-abuse rule (GAAR) was brought into force by Chancellor George Osborne in July last year amid political and public outrage over a string of revelations of stars using schemes to minimise their bills.

The rule allows a blanket approach to deciding which schemes are not reasonable and should be shut down rather than officials being forced to legislate against each.

But Labour - which has said it will raise £2.5 billion for the NHS by closing tax loopholes - said the rule was too weak because offenders were required only to pay the tax they had avoided.

Mr Balls said: " Tackling tax avoidance is a key part of our economic plan. A fair and robust tax system is vital if we are to bring down the deficit, safeguard our National Health Service and maintain public support for the dynamic open economy we need.

"This agenda will only be delivered if HMRC (HM Revenue and Customs) has the powers and resources it needs to act. We have supported the introduction of a general anti-abuse rule (GAAR). Those who set up abusive schemes should run the risk of being caught by such a rule.

"But it is currently a GAAR without teeth. Those who are caught have to repay the tax they tried to avoid, but they do not face a penalty.

"There is still no disincentive to try and game the system. That is why Labour will bring in a tough penalty regime for the GAAR, with fines of up to 100% of the value of the tax which was avoided.

"For the first time this will provide a tough and genuine deterrent to those who try to abuse the system and avoid paying their fair share of tax."

Tax campaigner Richard Murphy backed the fines plan, which he sought to include in the GAAR as a member of the panel that helped draw it up.

"Without such a regime, the GAAR is a toothless tiger providing, at best, HMRC with the chance to ask those found in default to play by the rules in future," he said.

"With significant penalties attached, the GAAR becomes a more potent threat and, regrettably, in the face of ongoing tax abuse, HMRC needs as many of those as it can get."

In a speech billed as a relaunch, Mr Miliband acknowledged that the reports of his own MPs plotting his removal were damaging to public trust and appealed to the party not to "let down" ordinary people.

Promising to take his message out of Westminster and more to ordinary voters around the country, he attempted to turn the focus away from his own popularity, saying the important thing was how to "change the country" rather than who has their "picture on the wall in Downing Street".

"There's a saying that goes 'what doesn't kill you makes you stronger'," Mr Miliband said. "As leader of the Opposition, over the last few days I have learned what that really means.

"You need resilience in this job, you need thick skin, but above all you need belief in what you are doing.

"Not belief based on a longing to have a picture on the wall of Downing Street, not belief driven by a sense of entitlement, not belief driven by the idea that it's somehow Labour's turn, but belief driven by the idea of how we must change the country.

"That's why I'm in this job, that's why it matters to me, that's what drives me on. And it is through our beliefs that we are going to win the general election."

Mr Miliband, who used an autocue after the no-notes party conference speech in which he notoriously forgot to mention the deficit and immigration, repeatedly vowed to take on "vested interests" - but named only banks and energy firms among them.

In an attack on Nigel Farage's Ukip "gang" - who have been attracting voters in Labour's northern heartlands - Mr Miliband said Mr Farage sought a return to "a more unequal, more unjust past".

In a wider rallying cry against all rival political parties, he told Labour activists they could "take this lot apart".

"W e know how we will do it," he said. " Door by door. Street by street. Town by town."

A Conservative spokesman said: "This is feeble stuff from a party with no economic plan - and a leader who just isn't up to it.

"Ed Miliband was at the heart of Gordon Brown's Treasury as year after year they broke their promises to deal with tax avoidance. In contrast, Conservatives are the ones getting to grips with the problem.

"If Ed thinks empty promises like this will get him into Downing Street, it's no wonder his own party are lining up to criticise his weak and ineffective leadership."