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Labour plans ‘relentless’ new £36bn tax raid by hiring 5,000 new HMRC snoops

If Keir Starmer defeats the Tories, he will struggle to meet his spending plans unless it raises a lot more cash for the Treasury. The only question is how Labour goes about it.

As I’ve written before, one likely option is to restore the pensions lifetime allowance, which hits people with a heinous 55 percent tax charge if they save too much for retirement.

Labour is also planning to slap VAT on private school fees and hike taxes on wealth non-doms, although Conservative Party chancellor Jeremy Hunt has now stolen that policy.

The truth is, these policies will only raise a few billion pounds, nowhere near the amount Labour needs to fund its spending plans once in pwoer.

Shadow chancellor Rachel Reeves has promised not to increase income tax and National insurance, that still leaves a host of taxes she could hike.

Options I’ve seen floated include tightening inheritance tax and capital gains tax, cutting tax relief on pensions contributions, smashing second homeowners and even introducing a wealth tax.

As yet, we don’t know what Reeves will do. She’s remaining tight lipped for fear of frightening the voters.

What we do know is that Labour is going to give HM Revenue & Customs a lot more powers to make people pay what they owe.

As I recently warned, HMRC already has wide-ranging powers and can delve deeper into your financial affairs than ever before.

Its super computer HMRC Connect tracks down a staggering amount of information, taking Big Brother surveillance to a completely new level, in the words of one accountant.

HMRC is now beefing it up by adding machine learning artificial intelligence (AI) technology, too. It will compare its data with the information on your tax return, and hone in on any discrepancies.

It’s right that people pay what they owe, with no hiding place. Otherwise honest taxpayers will have to plug the gap.

Yet HMRC’s efforts aren’t enough for Starmer and Reeves. Labour is warning that a lot of tax is still going missing, and it’s going to collect it.

It quotes figures showing the gap between the amount of tax owed and what the government collects hit a staggering £36billion in 2021/22, up £5billion in a year.

Labour reckons the Tories aren’t doing enough to close the gap as the number of HMRC investigations into offshore, corporate and wealthy tax fraud has fallen by more than half in five years.

The head of the National Audit Office reckons HMRC can recover £6billion a year through a concerted effort on tax avoidance.

Reeves are Starmer are now determined to make that effort, stating that the party will “relentlessly pursue the money that is owed”.

Labour plans to spend up to £855 million to bolster the number of tax compliance officers by up to 5,000 to increase the number of investigations.

A lot of voters might like the sound of that. After all, Labour is talking about targeting wealthy tax dodgers with assets squirrelled offshore.

In practice, its tax grab will be much wider than that. Combined with HMRC Connect, people need to get their tax affairs in order, to avoid unwittingly getting caught up in the raid.

Whether Labour spends the money it raises wisely is a different matter.


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