Danny Alexander describes aggressive tax avoidance as 'morally repugnant'

Treasury minister says 2p in the pound could be saved from ordinary person's tax bill by cutting avoidance by a quarter

Danny Alexander, the chief secretary to the Treasury, has waded into the row about tax avoidance, claiming an ordinary person's tax bill could be reduced by 2p in the pound if avoidance, or the tax gap, could be reduced by a quarter.

He refused to follow David Cameron in condemning the comedian Jimmy Carr's specific tax plans but said all aggressive tax avoidance schemes were "morally repugnant".

"As a Treasury minister I wouldn't get into any individual's tax affairs," Alexander said, in a tacit criticism of Cameron's decision to single out Carr.

Carr's scheme was seen as a particularly outrageous example by the prime minister, who last week described the set-up as "morally wrong". Cameron believes there is a distinction to be made between sensible tax planning to preserve a pension, and wholesale tax avoidance.

Speaking on the BBC's Politics show, Alexander attempted to define the schemes that are wrong, and those that could be construed as legitimate planning, saying: "What we are talking about is schemes that are set up, perhaps within the letter of the law as it stands at any particular moment, but which are set up purely with the purpose of reducing someone's tax bill."

His remarks came as the former prime minister Tony Blair said the mood on the debate had changed. "In the end this is a tough time and people need to know that the pain's being shared," he said.

The chairman of the powerful House of Commons public accounts committee (PAC) will reveal on Monday that parliament is going to investigate tax loopholes. Writing in the Times, Margaret Hodge, said some of the practices that had emerged "wouldn't look out of place in a banana republic".

She said the PAC will report on the issue of salaries paid through private companies to avoid PAYE and national insurance contributions in the next few weeks.

Alexander added: "These sorts of schemes which save wealthy people potentially many tens of millions of pounds in tax, they are paid for by everybody else.

"If we could narrow the tax gap in this country by a quarter we could reduce income tax for every basic rate taxpayer by 2p in the pound.

"So it's the working people of this country who are paying the difference because so many of the wealthiest think they can get away without paying their fair share of tax."

He was pressed by presenter Andrew Neil on whether the coalition had introduced a minimum tax level, as promised by the deputy prime minister, Nick Clegg, through his pledge of a tycoon tax.

Alexander said: "We took a major step in that direction at the budget in March. There were a number of tax reliefs in the tax system on things like interest payments, on business investments and so on which were uncapped, people could use them to the maximum. We've capped many of those reliefs. The only relief now that remains uncapped is charitable donations."

He said: "Those reliefs had been limited to 25% of somebody's income. If someone makes substantial donations to charity, which I think most people in this country would agree is a worthwhile thing to do, then they can reduce their tax bill."

He also claimed the general anti-avoidance rule in the budget would pick up some of the worst examples of tax avoidance.


Patrick Wintour, political editor

The GuardianTramp

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