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Major parties accused of using ‘made up’ tax avoidance figures

Labour, Conservative and Liberal Democrat politicians are using “made up assumptions” of increased revenue generated by targeting tax evasion and avoidance, according to the Institute for Fiscal Studies.

Tackling tax evasion and avoidance has proved a huge part of this year’s election campaign since HSBC was found to be aiding clients of its Swiss private bank in avoiding the taxman in February.

Since then, all of the major political parties have pledged to increase tax revenues by targeting tax dodgers.

The Conservatives have pledged to raise £5bn over the next parliament, while Labour has promised to raise £7.5bn a year from avoiders by the middle of the next parliament. The Lib Dems are targeting £7bn of new revenue.

However, in its analysis of the parties’ manifestos, the IFS says the SNP is the one major party “not to have used largely made up assumptions about how much they could raise from clamping down on tax avoidance to try to make their sums add up”.

The analysis comes after IFS director Paul Johnson told BBC News in mid-April: “Frankly, they’re not at all credible, I mean all of the three main parties are just making up numbers, quite honestly.

“They’ve essentially said ‘these are targets for what we want to get from tax avoidance’ – who knows whether that’s feasible, who knows whether that’s the kind of money which is actually achievable and, frankly, we’ll never know because you get these kinds of statements in all the budgets for the last 15 years and more, saying that each Budget will raise £1bn or £2bn from clamping down on tax avoidance.

“Actually, you look back at these, first of all you add them all up and you get to a completely implausible number and secondly you actually look back and say ‘that measure actually raised that amount of money’.” 

Analysing the Labour and Conservative plans, the IFS says while the former has not set out a clear timeline to report a surplus, the latter has yet to specify where it expects to make an estimated £40bn of cuts required to balance the books.

“There are genuinely big differences between the main parties’ fiscal plans. The electorate has a real choice, although it can at best see only the broad outlines of that choice,” IFS deputy director Carl Emmerson said.

“Conservative plans involve a significantly larger reduction in borrowing and debt than Labour plans. But they are predicated on substantial and almost entirely unspecified spending cuts and tax increases. While Labour has been considerably less clear about its overall fiscal ambitions its stated position appears to be consistent with little in the way of further spending cuts after this year”.

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