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
Introduced in 2013 to encourage R&D investment, the scheme allows UK businesses to pay only 10% corporation tax on profits derived from any UK or certain EU patents
Yet, KPMG’s annual survey shows that the UK is still an attractive place to do business, despite falling in rankings in tax competitiveness and FDI appeal
Following recent issues with HMRC’s personal tax computation software, Brian Palmer of the AAT questions whether the government’s implementation timeframe for Making Tax Digital is realistic
MTD cost estimates are not based on 'facts', and are 'disbelieved' by most small businesses and sole traders, says Lords committee chairman