We will launch tax crackdown on businesses that exploit loopholes, promises Labour

By THIS IS MONEY REPORTER

Updated: 09:17 EST, 28 June 2014

Seeing the light on tax: Shadow Chancellor Ed Balls.

A Labour blitz on tax avoidance would target businesses that exploit loopholes and make the system fairer, Ed Balls is set to announce.

Labour claims vast sums of tax revenue are going uncollected each year and has branded ineffective Chancellor George Osborne's measures to clamp down on tax avoidance and the use of overseas tax havens.

The shadow Chancellor said: 'At a time when working people are facing a cost-of-living crisis and the deficit is high, it's vital that everyone pays their fair share and we restore public trust in the tax system.'

Mr Balls will look at forcing banks to tell the taxman when there is activity in the accounts of supposedly dormant companies and introduce annual dormancy checks to stop the system being used as a vehicle to avoid filing corporate tax returns.

Chancellors and tax chiefs would face an annual grilling by the Treasury select committee on their attempts to tackle the tax gap - the difference between the amount owed to the Exchequer and the amount actually collected.

The public spending watchdog, the National Audit Office, would be given extra powers to scrutinise tax reliefs that appear to be being abused. The party will also launch a bid next week to close a loophole in the eurobond system that costs the UK an estimated £500m a year.

It comes after public outrage over the tax affairs of a number of international corporations, such as Amazon, Google and Starbucks, as well as criticism of HM Revenue and Customs over its so-called sweetheart deals with major companies which did not pay all the tax due.

'High-profile cases of tax avoidance have undermined both public trust in company taxation and also hit businesses who play by the rules and pay their fair share,' Mr Balls will say.

'The next Labour government will act to tackle tax avoidance including by closing loopholes, increasing transparency and ensuring we have tougher independent scrutiny of the tax system.

'George Osborne is failing to tackle tax avoidance. The most recent figures from HMRC show that the amount of uncollected tax in our economy - the 'tax gap' - went up last year. This isn't good enough, so Labour will make reversing this trend and narrowing the tax gap a priority for HMRC.'

Labour have branded Chancellor George Osborne's attempts to reduce tax avoidance ineffectual.

Labour will table an amendment to the Finance Bill next week urging the government to act to stop companies using offshore stock exchanges to avoid tax through the 'quoted eurobond exemption'. It will set out plans for the longer term to increase transparency in the tax system by making firms clearly set out details of their ownership and how much they are paying in taxation.

The party also wants a push to fully involve developing countries in international efforts to tackle tax avoidance.

Mr Balls will publish details of the proposals, which come after a wide-ranging consultation with business and experts, on Monday.