Avoidance debate lacks definition

Avoidance debate lacks definition

This week, Accountancy Age brings you two startling figures.

On the one hand The Hundred Group of FDs, along with PwC, calculates that
FTSE 100 companies last year paid £18bn in tax. Meanwhile, HM Revenue &
Customs believes that there is roughly £10bn in tax avoidance each year.

These numbers deserve some context.

The £10bn lost in avoidance amounts to roughly half the budget for transport
in the UK for 2005/06. Or a ninth of the budget for health. To put it another
way, the projected revenues for corporation tax over the current year, according
to last year’s Budget, is £44bn.

If the tax lost to avoidance is roughly the equivalent to a quarter of the
total take from corporate tax, you can see why the Treasury is getting hot under
the collar. There’s a sense of grievance for all the cash lost to the exchequer
that could be spent on hospitals, roads and schools.

But is it lost? How could it be defined as lost and therefore something to be
recovered if it results from entirely legal procedures? It is not, after all,
evasion.

And there’s the problem with this whole debate – a woeful lack of
definitions. This stems from government language that appears to conflate
avoidance with evasion, so removing clarity. UK corporates feel under siege,
accused of evading taxes when in fact they are engaged in avoidance.

So we are witnessing a fight back when we see the £18bn from The Hundred
Group, an effort to show that plenty of money is pouring into government
coffers. This amount may to a concession that the battle over definitions is
lost.

If that is the case then the government may already be on the way to an
overall victory. Watch the Budget for further manoeuvres.

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