finance

The rich will pay up when prodded. So let’s make tax-collecting great again | Torsten Bell


What do we want? More tax inspectors. When do we want them? Ideally a few years back, but now will do. Maybe not the most exciting protest song, but it does it for me.

My first job in the Treasury was for a very sexy team called Revenue Service Delivery, clamping down on tax evasion and avoidance by hunting those stashing money in Swiss bank accounts or pretending to be self-employed.

That’s probably less persuasive for the rest of you, but I hope I can get you on this niche march by mentioning that the tax debt owed to HMRC is twice what it was pre-pandemic. Even more compelling is new US research, which also tells us where our compliance efforts will deliver the best bang for their bucks. The authors use Internal Revenue Service (the US tax authority) data, to show that overall each $1 spent on face-to-face tax audits (ie, checking people have paid the right amount) raised $2.17.

Doubling your money isn’t bad, but there’s more. First, it matters who you audit. The rich have more complicated (ie, expensive to audit) tax affairs, but that’s hugely outweighed by the fact they are . . . richer.

It might cost three times as much to audit the top 0.1% as the poorest 50%, but you raise six times as much for each $1 spent. Second, this is just the initial revenue raised – ignoring the large deterrent effect of being audited (those investigated tend to pay more tax for up to 14 years). Taking that into account, the authors find an extra $1 spent investigating the top 10% brings in a whopping $12. A total bargain, supporting the Treasury’s recent decision to let HMRC hire 5,000 extra compliance staff. It’s time to make tax inspectors great again.

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Torsten Bell is Labour MP for Swansea West and author of Great Britain? How We Get Our Future Back



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