Election 2015: Labour to raise £7.5bn from tax avoiders

Tax evaders would face bigger fines as part of Labour's plan to raise an extra £7.5bn a year, if the party wins the general election.

The policy is likely to form a central part of Labour's election manifesto, which is due to be launched on Monday.

Ed Balls said Labour would carry out an immediate review of the tax collection system to close loopholes if it wins power in May.

The Tories said they would claw back £5bn from tax avoiders and evaders.

Labour claims Chancellor George Osborne has not set out how this would be done.

But Paul Johnson, the director of the independent Institute for Fiscal Studies, has said both main parties are "making up numbers" in terms of what they can raise from tax avoidance and evasion.

Speaking to the Radio 4's The World this Weekend, he said: "The Conservatives are committed to getting £5bn a year extra. Labour are trumping that by saying £7.5bn. It's almost impossible to know upfront actually what you can achieve from cracking down on avoidance and evasion."

Policy guide: Where the parties stand

Under the Labour plan, there would be an assessment of the powers currently held by HM Revenue and Customs followed by moves to beef up the agency's powers.

The party wants to change the so-called "carried interest" rules which allow private equity managers to pay lower rates of Capital Gains Tax - instead of income tax - even when they are not investing much of their own money.

Labour also want to prevent disguised self-employment and close loopholes used by hedge funds to avoid stamp duty.

'Fair share'

Shadow chancellor Mr Balls said: "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.

"Working people who are paying more in tax want everyone to pay their fair share. And there shouldn't be one rule for a few and another rule for everybody else."

Mr Balls will on Sunday set out his party's ten-point plan to tackle tax avoidance, which includes pushing a draft Finance Bill through parliament, and asking the Bank of England to "focus on risks from the informal economy".

David Gauke, Financial Secretary to the Treasury, for the Conservatives, said: "Ed Miliband and Ed Balls turned a blind eye to aggressive tax avoiding and evading for 13 years when they were in charge - they were the tax avoiders' friends.

"Ed Miliband has no economic plan to secure Britain's future - and it's hard-working taxpayers who will pay the price."

He said the coalition had clawed back £7bn a year in lost revenue and planned to go further.

The latest Opinium poll for the Observer gives the Tories a two-point lead over Labour. The Conservatives are on 36% up 3 points, while Labour is up 1 point on 34%.