On Work Avoidance Versus Tax Evasion


Ian Duncan Smith was on TV this morning (Sunday 14th Nov 2010) being very persuasive about his welfare reforms, which are part of the ConDem policy of delivering a £18 billion, cut to welfare spending.

It all sounded soooooo reasonable. He claimed that during the expansion of Brown’s Boom Eastern Europeans took 80% of the new jobs created while 4.5 million British workers remained on benefit because they were better off on benefit than working.

The obvious question no one ever asks is, why are these jobs paying such low wages that you can get more on benefit? The assumption is always that the wages are at a reasonable level and it is the benefits that are too high. It could of course be the other way round, that the benefits are set at a reasonable and humane level but that the wages offered at the bottom of the market simply cannot sustain a family with children in a baseline lifestyle compatible with our modern industrial society.

One also has to question the efficacy of chasing fraudulent benefit claimants rather than trying to close the tax gap. Tax Evasion (illegal) costs the UK Treasury £15.2 billion. Tax Avoidance (legal) costs £25 million. This gives us a total tax gap of £40.2 billion per year. Or £201 billion over this 5 year parliament.

The governments target for spending cuts over this parliament is £85 billion. This could be met by collecting only 43% of the legitimate tax that is not being paid by large corporations and wealthy individuals

Benefit fraud costs £1.1 billion. If such fraud was completely, 100%, eradicated it would take 77 years to pay off the governments target.

Yet as in Thatcher’s ‘80’s the Tory government relentlessly pursues the benefit fraudsters while leaving the tax gap untouched?

The situation is exacerbated by the fact that many multi-nationals were given hundreds of millions of pounds in grants and other benefits by our government to encourage them to set up business here. These grants were largely justified on the basis of the return the exchequer will get from taxing the profit generated by these companies. But it is these same companies that are so assiduously avoiding paying that £42 billion. So we the taxpayers get hit twice; we pay for the “privilege “of having these businesses set up in our country and then we stand by as they systematically avoid and evade paying UK taxes.

The International offshore tax avoidance system did not come about through some natural irresistible economic process it was deliberately created by the rich to provide a legal mechanism for avoiding paying tax. Many offshore tax havens were previously colonies and were specifically set up by their Imperial masters as tax havens for the rich of the mother country, others were created by a process of collusion between the rich elite of Old Europe and the USA to allow each other access to havens for their wealth.

The response of our government to all this is to largely ignore it, to ignore the ten’s of billions of tax avoided and evaded by wealthy institutions and individuals whose lives and standard of living would only be marginally affected by paying the tax, and instead concentrate on vilifying and hounding a few hundred thousand of the most financially and spiritually impoverished citizens of this country.

Even by the managerialist and instrumentalist logic of this ConDem government the policy simply doesn’t sense.

That being said there is clearly no social justice in allowing able men and women to consciously avoid working for a living by living on benefits provided by working tax payers. But two questions arise from that statement (i) How many are we talking about? (ii) To what extent are they “avoiding” work and to what extent are they unemployable?

This morning Ian Duncan Smith implied that most of the 4.5 million on benefits were capable of work. He later acknowledged that there are many disabled and long-term sick claimants who will never be able to work but nonetheless he gave the impression that there were millions of work-shy Brits who the ConDems would force back to work – undoubtedly music to the ears of many of the hard-working, tax-paying electorate.

Thatcher’s government made similar claims in the ‘80’s but in reality all the effort that went into her campaign against “scroungers” had a negligible effect on the benefit budget, which perhaps exposes the rhetorical nature of the attack on scroungers; i.e. the political use of the prejudice against a so-called “Chav” underclass to divert attention from the self-serving economic policies of the Conservatives – the aim of which is to force wages down by removing the protection of the Welfare State from workers in order to make workers more “flexible” in the market place, i.e. to do what they are told.

According to the Free-marketers, by providing a “safety net” the Welfare State intervenes in the market place and undermines the assertive power of business over the workforce. Indeed, many jobs are so unpleasant and alienating that people will only do them if there is no other choice – the Welfare State, it is argued, gives them that choice and that is why it has to be destroyed – while leaving the rich free to avoid and evade tax to their hearts content.

I Am Not A Number

Political and Philosophical Dispatches From An Individual Living In A Society

corporate democracy economics freedom left-wing libertarian managerialism moral philosophy politics radical socialist society

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