Knocking on doors recently I have been surprised how many people are now asking what is being done to ensure that EU migrant workers are observing the same rules as everybody else when it comes to tax.  As a Liberal Democrat I am proud of our party’s strongly pro-European policy, but just because I am strongly in favour of something, it does not mean I am not able to see problems and suggest changes.

One such problem is EU migrant workers, entering the UK, working for cash and not contributing to our tax system.  I strongly believe this is only the minority of migrant workers and no doubt an equal minority to the number of UK citizens who wilfully avoid paying their correct share of tax.

An isolationist stance such as taken by some other parties is not the solution, I want to be able to benefit from the ability to work abroad inside the EU as much as I want to be able to benefit from a competitive labour market allowing workers from abroad allowing companies to hire workers in times when we have a labour shortage of our own.

It is not just people who avoid paying tax; many companies avoid tax through complicated efforts to reduce profits in one area of the business or the use of offshore accounts to avoid tax on interest on investments.  Businesses aid some of their owners or employers through the use of payments by dividend as opposed to income from salary or wages.

Having outlined some of the problems, possible solutions include the end of cash transactions for values over a nominal sum or even for all transactions to be replaced with electronic payment.  If this was to be implemented right away a low cost way of doing so could be payment by mobile phone text.  The advantage being that these records could be available to the tax man and also automate many personal or small business financial management arrangements, such as seeing where we spend all our money or to produce accounts ready for the tax office.

The quest to end all offshore tax havens will likely be a long one and should not result in world wide tax harmonisation.  It needs to be done in such as way as not to prompt wide scale capital flight from economies making their use more difficult and as such will likely need cooperation beyond national level, such as through the EU or world summits.

The matter of capital gains tax being lower than income tax could be solved in a number of ways.  Capital gains tax and income tax could be brought together at a level between where they both currently are.  Capital gains tax could be altered so as not to be at a flat rate for individuals over a certain amount each year, but remain as it is for company tax as a whole.  They key thing here is to create a system where taxation for individuals retains incentives for entrepreneurialism, but doesn’t create a two tier system where some individuals pay less tax on large incomes than others pay on small incomes.

What frightens me most about British politics is that by not taking action both Labour and the Conservatives are making it very easy for extremist parties to promote isolationist policies that blame other people for our current economic situation, rather than standing up for the benefits of immigration, while at the same time working to ensure a fair market place for all through better education and modernisation of our systems to adapt to the changing globalised world.