Debate illustrates schism on avoidance

LAST WEEK’S Accountancy Age tax avoidance debate highlighted the fundamental issues both the accountancy profession and government face in the ongoing battle against tax avoidance.

With the motion ‘tax avoidance is an unacceptable exploitation of the tax system’ only narrowly defeated – taking 47% of the 943 votes, to 53% for the opposition – many in the accountancy world clearly feel avoidance is not the cut-and-dry issue the general public sees it to be.

Over the course of the week, the argument has evolved, with the discourse covering legal and moral standpoints, as well as more nuanced areas, such as business interests and the UK’s attractiveness to investors.

Uncertainty in the law was a key area of debate, with Tax Reseach UK founder Richard Murphy proposing the motion, noting lack of clarity is often utilised in order to mitigate liability. This was something guest voice Pinsent Masons partner Ray McCann pointed out there is often “no guidance to how a taxpayer can actively navigate this uncertainty without merely standing still”.

Interestingly, though, throughout the debate, the argument always returned to the fundamentals of what is legal, and the morality of tax avoidance.

As one reader put it on the first day of debating: “Who do you have a primary responsibility to when it comes to tax? Yourself? Your family? Your business? Your shareholders? All your stakeholders? The government? I believe your answer will determine where you stand in this debate.”

That, to a large extent, rings true. Indeed, for many, to point out that avoidance is legal is a valid and robust defence, but the force of public feeling is one that, while unlikely to go unrecognised, can at times not receive the credence it is due.

That could be changing, given Goldman Sachs’ decision not to press ahead with plans to delay bonuses to its UK staff until after the top rate of income tax drops to 45% from 50%.

Yet that move would hardly have represented the kind of exotic schemes we are used to hearing of, and hardly constitutes what many would describe as ‘abusive’. For every such decision, there were several more detailing more extravagant methods for reducing tax liabilities.

That said, part of the public’s ire – and the reason it might not always receive due consideration – is the lack of understanding of the issues. And it’s not hard to see why, after all, while we continue to be unable to satisfactorily define what is abusive and what is not – even in the environs of a debate – avoidance is an issue unlikely to be solved any time soon.

To view the debate, click here.