MP condemns 'cancer' of tax avoidance in debate

Michael Meacher, Labour MP for Oldham West and Royton, has described the tax avoidance and tax evasion as a "cancer in Britain's society".

Leading a debate on 13 September 2012, Mr Meacher said HM Revenue estimated tax lost to avoidance and evasion in 2009 to be £42bn, enough to cover the budget deficit.

Tax evasion is the deliberate and illegal attempt to evade paying tax. Tax avoidance may be accidental or the use of a loophole in tax law to minimise the amount of tax paid.

Prime Minister David Cameron has described the use of tax avoidance schemes as "morally wrong". Recent high profile cases of tax avoidance include the K2 scheme used by comedian Jimmy Carr and the setting up of private companies by individuals to avoid paying income tax.

In December 2010, the government launched an inquiry, led by Graham Aaronson QC, into a proposed General Anti-abuse Rule (GAAR), covering the grey area of tax avoidance schemes.

The government accepted the report's recommendation that a GAAR targeted at artificial and abusive tax avoidance schemes would improve the UK's ability to tackle tax avoidance.

The government is now consulting on bringing forward legislation to establish a General Anti-abuse Rule in a future finance bill.

Margaret Hodge, chair of the Public Accounts Committee, said the previous Labour government was wrong to have cut staff numbers in the tax collection department of the HMRC.

Mrs Hodge praised the government's action to stamp out "off-payroll" arrangements for senior civil servants and officials, where they had avoided paying income tax.

Liberal Democrat MPs John Pugh and Stephen Williams both supported the proposed General Anti-abuse Rule, citing its successful implementation in many other countries.

Shadow Exchequer Secretary Catherine McKinnell said that although exact figures were disputed, any reduction in the amount of tax lost would help the most vulnerable in society.

Ms McKinnell criticised the government's proposed GAAR as being too narrowly focussed and unlikely to eradicate any but the most abusive tax avoidance schemes.

Exchequer Secretary David Gauke, who has previously described paying in cash for services as "morally wrong", replied on behalf of the government.

He denied that staff cuts would affect the ability of HM Revenue to collect taxes properly, stating that numbers of staff involved in compliance would actually rise.