Shadow chancellor Ed Balls said at the weekend that if the party is successful at next month’s general election, a future Labour government will immediately introduce emergency legislation to increase fines for tax avoidance and close tax loopholes.

He said that in a Labour government’s first week there  will be a draft Finance Bill, which he described as ‘an anti-tax avoidance bill’, to deliver the measures set out in Labour’s ten point plan to tackle tax avoidance and evasion.

Under Labour proposals, the Chancellor and the head of HMRC would both be summoned annually before parliament to explain how they were performing against the target to bring in £7.5bn annually, Balls said.

Balls described this target as ‘ambitious’ but said the aim was to achieve this total by the midpoint of the next parliament. 

A new Labour government would carry out an immediate review of the tax collection system and an assessment of HMRC’s current powers.

‘We will close loopholes the Tories won’t act on, increase transparency, toughen penalties and abolish the non-dom rules. And our first budget will make sure that following an immediate review of HMRC, it has the powers and resources it needs to come down hard on tax avoidance and evasion,’ Balls said.

Balls said that a Labour government will also ask the Bank of England to focus on risks from the informal economy, including avoidance, evasion and the tax gap, in delivering its financial stability objective.

There are no details on how a Labour government will raise an additional £7.5bn, although the party states that under the last Labour government the tax gap was falling by £1.5bn a year on average between 2005-06 and 2009-10.

Labour says that since then the tax gap has been increasing by an average of £1bn a year. It states: ‘The next Labour government will set a target to not only get back to avoidance and evasion falling at £1.5bn a year, but reverse the increases under the Tories as well. That will mean cutting tax avoidance and evasion by £7.5bn a year.’

Labour’s ten-point tax plan includes:  abolishing the non-dom rules; re-writing the carry interest rules; closing stamp duty loopholes relating to hedge funds; mandating the UK’s Overseas Territories and Crown Dependencies to produce publicly available registries of beneficial ownership; and  increasing penalties for tax avoidance including new penalties for those who are caught by the General Anti-Abuse Rule (GAAR).

In addition, the plan covers closing loopholes like the Eurobonds loophole which allow some large companies to move profits out of the UK and avoid corporation tax; scrapping the Shares for Rights scheme; tackling disguised self-employment by introducing strict deeming criteria; tackling the use of dormant companies to avoid tax by requiring them to report more frequently; and making country-by-country reporting information publicly available.