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Bishop of St Albans calls for significant UK tax reforms for equality

29 January 2021

Scott Graham on Unsplash

BISHOPS in the House of Lords have called on the Government to make a commitment to significant reform of the tax system to clamp down on avoidance and to make it fairer for the poor.

In a debate on Thursday of last week, the Bishop of St Albans, Dr Alan Smith, led calls for significant changes to what he described as “deeply entrenched tax inequalities”.

Prompted by two recent reports by the campaigners Church Action for Tax Justice, Dr Smith said that there was an urgent need to “level the playing field and facilitate a fairer tax system that ensures that those with the deepest pockets do their duty”.

Too many international companies did not pay their fare share of tax in Britain, he argued, while many British overseas territories and Crown dependencies were notorious tax havens, siphoning vast sums away from both the British Exchequer and developing nations.

Four of the top-ten tax havens, according to a 2019 list, were associated with the UK: Jersey, the British Virgin Islands, Bermuda, and the Cayman Islands.

“Furthermore, should the Government choose to move ahead with free ports, and essentially create onshore tax havens within the UK, a corporate-tax-rate race to the bottom may be unleashed,” he said, referring to proposals to create a network of customs-free zones now that the UK had left the European Union.

Dr Smith also criticised the heart of the existing tax system — income tax and National Insurance — which, he said, was regressive and meant that wealthier people paying a lower proportion of their income than the poor.

Both capital gains tax, which the rich often used to escape the higher rates of income tax, and council tax were also deeply flawed and facilitated injustice, the Bishop said.

Not only was it “parochial and antiquated” to still be using valuations in council tax which date back to 1991, there were not enough higher brackets, meaning that those living in homes worth £320,000 in 1991 paid the same tax as those in homes worth ten times as much.

“Far from being some radically redistributionist document, the proposals from Church Action for Tax Justice seek only to induce fairness in the tax system and prevent the heaviest burden falling on the poorest,” he concluded.

His entreaties were endorsed by several others, including the Bishop of Portsmouth, the Rt Revd Christopher Foster, who attacked the “pernicious interaction of income tax and National Insurance so-called contributions”.

Lord Hendry (Labour) said that Britain would never be able to “end the blight of inequality” until the “evil of tax-dodging by powerful corporations, facilitated by accountants and lawyers” was ended.

British overseas territories and Crown dependencies were “up to their necks” in tax avoidance, Lord Mackenzie of Luton suggested.

A former Bishop of Oxford, the Rt Revd Lord Harries of Pentregarth, said that poorer nations, which were already facing a Covid-inspired economic crisis, were deprived of as much as $200 billion every year by tax avoidance. He asked whether the Government would follow in the footsteps of some European countries and deny any coronavirus bailouts to companies domiciled in tax havens.

Responding for the Government, Baroness Penn said that ministers were taking action to tackle tax avoidance, a “scourge on our society”.

She said: “At 4.7 per cent, the tax gap in the UK is at its lowest ever recorded rate, falling from 7.5 per cent since 2005-06.” This was in reference to the amount that HMRC believes that it is due but is unable to collect in tax each year.

She also disputed suggestions that the personal tax scheme in Britain was regressive: the top one per cent of taxpayers had been expected to contribute 29 per cent of total revenue in 2019-20, she said.

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