THERE IS NO single policy or solution that can prevent the occurrence of tax avoidance because there is no single cause for the phenomenon, according to Devereux Tax Chambers barrister Jolyon Maugham.
Speaking at the ICAEW’s Hardman Lecture, Maugham told the institute’s members that “plugging holes” in the tax code “only slows the leakage”, but does not prevent it.
“The tax still wants to escape the colander,” Maugham said. “As Samuel Butler put in Erewhon – ‘Even a potato in a dark cellar has a certain low cunning… He sees the light coming in from the cellar window and sends his shoots crawling straight thereto’. Tax has that same low cunning: it will look for the other holes in the colander, even if higher up, where the effect isn’t so strong.”
Despite that issue, Maugham said, “the heavy lifting on personal tax avoidance is now done”, and vigilance is required to stymie the remaining activity.
HM Revenue & Customs, though, ought to “be more activist in encouraging people to engage with reality”, he said.
One of the solutions he posited was the Badges of Tax Risk project in order to help taxpayers discern potentially egregious schemes from the benign.
“My view is that we need to give taxpayers the tools to assess whether what they are being offered is an ‘investment opportunity’ or is really a piece of ‘counter-purposive tax planning.’ And not just with the benefit of hindsight.
“Many members of the tax community have chipped in to a collective project called ‘Badges of Tax Risk’ which proposes a series of questions that a taxpayer might ask herself to distinguish good from bad tax planning. It’s, I think, a really valuable project and the signs are that one of the Big Four is going to throw its considerable weight behind the project. That would be a very welcome development.”
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