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13 Mar 2012
ONLY A HERMIT could have failed to notice the current furore over "abusive tax avoidance". After all, the media debates are often full of the self-righteous moralising over the activities of certain individuals and corporates who seek to minimise their tax burdens. Indeed one would imagine that tax avoidance is one of the great crimes of our age. Except that it's not a crime.
To further shape the debate, the Government has deliberately blurred the distinction between avoidance and evasion by tacking the word "abusive" onto the former. David Gauke was recently quoted as saying "Aggressive tax avoidance is ‘anti-business' and businesses should pay their full tax". Previous announcements have referred frequently to taxpayers paying the "right amount" of tax.
The plain fact that seems to have been overlooked in the din of the debate is that tax avoidance is perfectly legal and, one might say, mandatory. Is the company director who fails to take all legal steps to minimise the company's tax liabilities really doing his best as a custodian of the company's assets?
The current explosion of comment comes as no surprise. It suits the government very well to promote and foster a view that tax avoiders are "bad" and their activities are damaging to the country.
The economy is in bad shape, as we all know, and the Treasury is in desperate need of funds. More importantly, attacking tax avoiders reinforces the Government's mantra that "we're all in it together" and helps to deflect attention from the cuts.
A recent article in The Independent criticising an avoidance scheme promoted by a firm says, "In this case, both the clients and the firm were asking themselves the wrong question (can we get away with this?) rather than the correct one (is this the right thing to do?)."
The problem here is that, despite the government's efforts to redefine the English language, there is no such thing as the "right amount" of tax. Are they seriously suggesting that taxpayers should look at their income and gains and decide what tax bill it would be appropriate to pay? Therein lies anarchy.
Tax liabilities should be assessed in accordance with laws made by Parliament. If gaps and loopholes appear, then it is quite right and proper that laws should be amended to correct the situation.
To suggest that the taxpayer should somehow be the arbiter of what is "the right amount of tax" is arrant nonsense and a complete abrogation of responsibility.
Andy White is a tax partner at Carter Backer Winter LLP
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Visitor comments Add your comment
TAX AVOIDANCE
Anyone out there with an ISA? Sounds like tax avoidance to me!
Posted by: Tony Watson, 13 Mar 2012 | 11:53
Alice in Wonderland
I wholeheartedly agree! Vote for me in 10 days time brothers!
Posted by: Ken Livingstone, 13 Mar 2012 | 11:56
Tax avoidance versus tax planning
Question: What's the difference between "tax avoidance" and "tax planning"?
Answer: Nothing at all, they are the same. Except the Government seems to think the first one is a crime!
Posted by: Dave Chaplin, ContractorCalculator, 13 Mar 2012 | 12:33
Spoken by a custodian
This should be read in light of the fact that its written by someone who earns money selling tax services to clients. Whilst I agree with the point that its for the Government to legislate effectively there are far more considerations to be taken into account, public perception against brand image, complexity of structure after planning and strain on finance team internally to maintain, HMRC reaction i.e Business Risk Review, above the line fees in implementing such structures. Believe me when I say the only winners are the firms who take £100ks in fees. The roganisation who avoids often gets left in an neverending battle. Firms often miss the reality of their avoidance schemes and articles like this encourage people to jump into a spiders web rather than the pot of gold promised.
Posted by: Anonymous, 13 Mar 2012 | 15:08
Avoidance schemes
I don't know whether you heard John Whiting on Radio 4's "File on Four" last night agreeing that some EBT schemes were too aggressive, or something to that effect. Also highlighted were personal services companies, especially in a public service context. Worth looking out for on the listen again facility.
Posted by: John Hunston, 14 Mar 2012 | 12:05
What is the right amount of tax?
What is the right ammount of tax is a matter of opinion. A multi-millionaire may put some money in an ISA. That is a form of tax avoidance just as much as some convoluted off-shore scheme.
Tax evasion is definitely illegal. If however, a taxpayer takes advantage of a tax saving arrangement that the Government had not intended to allow (a tax loophole), there is no blame on the taxpayer. It is the Government's fault for poor drafting.
Posted by: Kevyn, 14 Mar 2012 | 12:52
let's look at the other side
tax is generally too high. Why should someone paying £5m for a house pay more than someone paying £120k. Why does the rate go up so much. Make it incremental. Go over £250k then the £250k to say £275k is taxed at a higher rate. But why a 200% increase. Why charge someone 50% tax. I expect many 50% taxpapyers are providing employment in some form (Not sure about bankers but am sure somehow they contribute - granted they were allowed to do some stupid things in the past). After all we also pay indirect taxes too - VAT - most things cost 20% more. So the effective tax rate is too high. Where does the money go? Forget avoidance for a while. Let's look at where the money goes!
Posted by: S Wood, 19 Mar 2012 | 20:20
Tax avoidance is creating new legal structures
Why does the government not use immense intellectual and legal powers at its disposal to outlaw tax evasion. By taking the moaning and groaning, the government is throwing the towel to admit that it does not have the intellectual strength to cover losses from tax avoidance.
Paying tax by the rules is a legal approach that all law abiding citizens need to take, and that includes the government. If one is clever enough to pay less tax through legal structures, surely this is his intellectual core competence that must one appreciated. And if the government does not like it, it has the legal powers to overturn it. But why moan about it? The government created the laws and we expect it to honor the. So let everyone use them and if the government does not like them, change them.
Posted by: Kamaljit Sood, 19 Feb 2013 | 13:55