What Can MPs' Tax Returns Actually Tell Us About Dodgy Dealings?

After trying to brush aside claims that he had profited from his father's offshore tax arrangements that had been revealed in the Panama Papers, David Cameron finally published his tax return this week. George Osborne and Jeremy Corbyn were quick to follow suit, and now other leading politicians are trying to get in on the wild tax return-publishing party.

But do these tax returns actually tell us whether or not our politicians are paying the right amount of tax? You might think that as tax returns only show the income you declare, and are taxed on, any income you're evading tax on wouldn't show up there anyway.

There is some truth to that, but the actual situation is far more complex. We spoke to Richard Murphy, a chartered accountant, political economist and director of Tax Research UK, to ask what a tax return can actually tell us. He had a lot to say about where we should be focusing our inquiries, how transparency can help us stop tax fraud and other ways a more public registry of tax returns could benefit most of us.

VICE: With all these tax returns that are being published now, what is it exactly people are looking for within them? What would show up on a tax return that made you go, this guy is using offshore arrangements or this guy is evading tax?
Richard Murphy: Let's be totally honest. Publishing tax returns does not tell us everything that we need to know. In particular, a tax avoider is doing their very best to make sure that something is not on a tax return. So you might say that tax avoidance is not shown by what is on a tax return, but what actually the tax avoiders manage to keep off their tax return.

Now there's more to it than that. Obviously there could be a declaration on the tax return that the person has taken part in the tax avoidance scheme - there is a box on the tax return that asks you if you have taken part in such arrangements, and I think it would be very unlikely we'll be seeing one of our politicians who has actually done so. They would have to be absolutely bonkers to have gone and done such a thing. So, we're not seeing blatant situations like that.

But would a tax return tell us if someone was specifically using an offshore tax scheme, like the ones described in the Panama Papers?
The tax return doesn't require the listing of particular sorts of income, so it can say, for example, "income from unit trusts or income from foreign unit trusts" but doesn't actually have to say where they are or what the name of the trust is or who managed it or whatever else. So in that sense, we also don't learn a great deal from the tax return.

There are other things tax returns don't tell us. Boris Johnson has a source of income from self-employment. So does Jeremy Corbyn for that matter, because he has actually earned income from doing lectures. But a tax return doesn't tell us who actually provided the source of income. So, in that sense, I have been critical of this attempt to release tax returns. As much as I want information in the public domain, I would actually like usable, useful information in the public domain.

What kind of extra information would you like to see?
In the case of MPs at least, they have to go a little further than the tax return. I would prefer MPs to have a special page attached to their tax return to show: What are the sources of income of earning? Who are they employed by apart from the House of Commons? If they have a source of self-employment, who is the primary source of that income? If you invested income, what are the major sources? Now I wouldn't bother about less than a thousand quid or something, let's not be silly here, but we need to set some sensible parameters for where MPs are getting their earnings from.

Are we learning anything else from the publishing of these tax returns?
Well, let's just go back - why do we want to see a tax return? Candidly, I don't think it's about tax avoidance. I mean it's certainly not about tax evasion. If I'm honest, I am presuming that none of our principal politicians in this country are engaged in anything desperately dodgy. And despite Dennis Skinner's claims, nor is David Cameron. His father might have been, but he isn't. I don't think David Cameron's father covered himself in glory with what he did and I certainly wouldn't have been saying I was proud of what he did, and I think that was a political mistake on Cameron's part. But with regard to the tax return, has David Cameron done something which is desperately dodgy? Quite frankly, no.

What we do want to know is whether a politician has other influences upon their behaviour. That's the important point. And we can use tax returns as an indication of whether they are objective when they come to consider issues of passing the laws, which will affect us all.

How might they be influenced by their other incomes?
Let's look at George Osborne's tax affairs. He's benefitted from the cut of the 50p tax rate. 50p to 45p, he gained from that. He's also managed to somehow earn a significant amount in dividends not long before he ends up imposing an extra tax on dividend distributions from companies, so he's avoided that obligation.

Now that gives us some indication that George Osborne is aware that he's claiming his dividends when it wasn't at 50p tax rate, but a 45p tax rate and before he imposed an extra charge of 5% on dividends distributions. Was that canny? Was that just chance? Was that coincidence? We don't know. But it does suggest some tax planning is going on.

Both Cameron and Osborne are also earning a massive amount of money from renting out their properties which they can only do because the state is providing them with alternative accommodation, which I think is you know, a little ironic. So are they truly objective when they come to actually looking at legislation on housing given they have a particular and substantial benefit from owning properties?

OK, but if we are to move away from politicians for a moment, are you saying publishing tax returns wouldn't be helpful in looking at people who are involved in more serious tax evasion?
No no no no, hang on a minute. Actually, let's move away from our senior politicians and on to the more general issue about why people publish tax returns. Why would we want public tax returns generally published? Let's talk about that because it's a different question altogether.

First of all, if we decided we were going to publish everyone's tax returns, there are a number of significant social issues that we may be able to address which at the moment may be difficult to do so. One is gender pay inequality. If we put tax returns on public record, we can see inside a company and say: well I'm doing this job and so is x, are we getting the same pay, given our relative stage in our career progression? No, he appears to be male and is earning 20% more than she. Prima facie that is a case for inequality. The best and most constructive impact upon the gender pay gap that I can imagine would be putting tax returns on public record. I cannot think of a better benefit than that.

Secondly, offshore tax abuse, whatever people say, is a long way from being the biggest tax problem that this country has. We may lose five billion or so a year to offshore but I doubt that it's much more than that, and I've had a serious go at estimating it. In terms of tax evasion, people within the UK who are not declaring the tax that they owe on shadow employments, fake self-employments, on the cash-in-hand of small businesses and everything else, could be £50 billion a year. Ten times the significance of offshore tax abuse. So we are looking in the wrong direction when we look at offshore. I mean I'm not saying it isn't an issue, but actually what putting tax returns on public record would mean is that the person who is living in the very large house with the flashy lifestyle, the big BMW, the swimming pool and everything else, who apparently is declaring £25,000 a year and has done for years on end, will be glaringly obvious. I think that will put a lot of pressure on other people because they will realise that there is somebody that will look at what they are earning and might report them to the revenue and if that happens then the chance that we will close the tax gap, which will have an enormous beneficial effect.

So from your perspective, if we are trying to deal with the tax gap more, are tax returns the first bit of information that aren't currently made public that you would like to see made public?
No, I would actually start slightly earlier than that. I would start with all private limited companies in the UK being required to publish their accounts. At the moment, they only file what's called abbreviated accounts so we don't know how much money they earn. and secondly, about 400,000 companies a year do not file accounts at all, despite the legal obligation to do so. So I would address that problem first. I would also demand that HM Revenue & Customs have the resources to chase corporation tax returns, you know missing companies, who should actually be making proper declarations. But at the moment they are not making any declarations at all and are being struck off the register of companies for simply failing to do what is required of them by law, and that is not good enough.

Finally, do you think there's a degree to which politicians talking about their tax returns is a bit of a switch and bait? Parading their openness about tax returns to duck out of other questions?
Not about their finances. I think it's a bit of a distraction from the bigger question of tax havens. I think it is a distraction from the bigger question of the utterly corrupt system that is offshore and the failure of the British government to tackle it. I think it is unfortunate that in a sense the two are being conflated, because it is taking attention away from the fact we do have responsibility for a whole pile of tax havens, which we should be focusing upon. It's taking attention away from the fact that European Union is today is not going to do the right thing with regards to requiring publication of information by multinational companies on where they undertake their tax activities. So I think that's unfortunate. Is it trying to take deliberate attempt to actually take away from other information about their tax affair? I vey much doubt it.

Thanks Richard.

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