Is it OK to avoid tax? Not long ago the majority of people might have agreed that it was. After all, as along as you aren't doing anything illegal (ie, evading tax), what business is it of anyone else's?
That view is changing. In his budget, George Osborne said he regarded "aggressive tax avoidance" as "morally repugnant". He then made a brave attempt (since failed) to force Britain into a minimum universal income tax rate by capping the level of tax reliefs any one person can claim. The press then picked up on the scandal of public-sector employees avoiding national insurance and cutting their overall tax bills by having their salaries paid via companies.
This week things have moved further, with a cover story series in The Times headlined 'The Tax Avoiders'. The paper claims that avoidance costs Britain £4.5bn a year; exposes a particularly aggressive scheme apparently used by comedian Jimmy Carr to make his income-tax liability vanish; and has a go at the tax affairs of Take That too. I'm with The Times on this one. Why should Carr be allowed to channel his income via Jersey to avoid taxes when he lives, works in and benefits from Britain?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Why should pop stars get away with using partnership structures as tax shelters while the rest of us finance the infrastructure around them? Surely, whatever you feel about how the state spends our money, it doesn't make sense that, as The Times claims, "thousands of wealthy people in Britain pay as little as 1% income tax using below-the-radar accounting methods"?
So it should be good news that not only is HMRC clamping down on evasion via its various tax amnesties, but that in his budget Osborne also said he was to start consulting on a 'general anti-avoidance rule' (GAAR). I'd liked the sound of that, in that it suggested a blanket ruling out of all kinds of obvious avoidance: so anyone running a charity for their own purposes could perhaps be forced to pay up just as much as someone in a Carr-type Jersey scheme.
Sadly, it isn't going to be quite like that. The consultation is now not for a general scheme, but one covering "abusive schemes". Why? Because anything wider would also affect "responsible tax planning". But why is tax planning different to tax avoidance? They are surely the same thing efforts not to pay the same tax as everyone else. If Osborne could bring himself to ignore the vested interests around him he might find this less complicated.
He needs to simplify the system, knock out all confusion, then introduce a proper GAAR that prevents the entire spectrum of what accountants like to call tax planning and we call "landing the rest of us with the bill". Having done that, he can then use the savings to cut overall tax rates. If history is anything to go by, that will pretty much instantly raise his revenues. How hard can it actually be?
-
UK food price inflation rate ‘lowest level in two years’, British Retail Consortium findsNews Food price inflation is at its slowest rate since March 2022, according to the BRC. It also found non-food products have gone into deflation.
-
Top-quality, rapidly growing European stocks are selling at enticing valuationsTimothy Lewis, portfolio manager at JPMorgan European Growth & Income tells us where he’d put his money
