As a spin off from another thread, Brexit, where the issue of the EU's plan to unify corporate tax rates across the EU was raised which, in turn, bought out the subject of 'tax havens' and 'off-shore' this that and the other. I questioned what is wrong with tax avoidance. I still am questioning it. Tax avoidance is a legitimate method of tax planning to delay, minimise or avoid paying tax until the last moment. Tax evasion is illegal. What is wrong with tax avoidance either by corporates or individuals? Please discuss amongst yourselves as I'm now off to watch the rugby.
Just had a long chat with myself about this topic and have come to the conclusion going to the pub and watching the rugby is by far the best solution.
I am going to the pub about 6pm to spend some tax avoided money on heavily taxed beer - they get you in the end
It's legal but it's not gonna get you any fans. But that doesn't seem to matter because we keep buying starbucks and not stoning jimmy carr to death.
You use the words "legitimate" and "illegal" as though the law was fixed and immutable. Actually there is a new Finance Act every year, and sometimes a Taxes Management Act or similar as well. Tax law keeps changing. All taxes have exceptions, and exceptions to the exceptions. Loopholes keep being discovered, created, or closed up. In the UK in recent years, the process of preparing the next Finance Act is largely outsourced by the Treasury to big accountancy/management consultancy firms (PwC, EY, etc). These firms are in a position to (and actually do) insert loopholes into tax laws, which then enable their clients to avoid paying taxes. Incidentally the firms are paid large sums of money by both the clients and the Treasury (i.e. other taxpayers) for these functions. I happen to think there is a great deal wrong with corporations distorting tax laws so as to minimise their tax liabilities, and that their power to contrive a situation designed to enable them to call it "legal" does not mean it isn't corrupt.
I have thoughts! (Do pick yourselves off of the floor.) Taxation is the means by with the State funds services that the electorate feels are essential. I will avoid any reference to waste, corruption and government over-reach in this thread (I hope). Funding the Nation is not a game. It's a serious process for serious purposes. The avoidance of legitimate taxation is not cheating at cards, football, Who Wants To Be A Millionaire, etc. Taxation is the lifeblood of public services and artificial avoidance is a disease of the blood. As members of society, if we gain income under the protection of society, we are morally obliged to pay taxes to ensure these protections continue. Cute and clever avoidance schemes notwithstanding. Each pound acquired as income should be treated in accordance with taxation law. Taxation law should be applied equitably, to all, and should not depend upon who you are and what clever, artificial schemes you have available to you. Income earned in this country should be subject to this country's taxation. A pound earned from a business conducted in the UK should be subject to taxation in the UK. There should be no exceptions. This is all broad-brush stuff. Allowable expenses of course should reduce tax liability, with one caveat and this is the crux of the issue for me - below. Allowable expenditure should be based upon real expenditure. For example: Income derived from selling coffee in a coffee shop should be taxed, less the cost of materials, wages for staff, rental on the business premises, utilities, etc etc. This would apply to a family-owned business and it should apply to any other business model. A business that sells coffee in the UK, deferring its UK liability because its profits are erased due to "management charges" in another country, should not be able to reduce its UK liability in that way, for two reasons. One, this model of business is a death knell for small, family own businesses who are financially disadvantaged as they actually have to pay their taxes in the UK ... and Two, the UK is deprived of the tax revenue it is owed, by any moral measure, on income earned in the UK. Taxation is not, as I say, a game. It is not a case of, "Ooh, clever you, you dodged a tax liability!", a liability which by any useful standard should be paid over. The ability of multi-nationals and large UK corporations to avoid a country's taxation via chase-the-lady accountancy is immoral and counter-productive to the health of the nation - in terms of the ability to pay for public services and in terms of the nation's sense of fair play, fair competition. People always tell me that the difference between tax avoidance and tax evasion is crucial to this argument. I am here to tell you it is irrelevant. A shortfall of taxation revenue, a subsequent loss of essential or desirable public services, due to evasion and avoidance are the same at the end of the day. If you cannot pay for enough nurses, it matters not one microfuck that the shortfall is due to hiding income "legitimately" or illegally. I genuinely don't care about anyone's argument that "careful taxation planning" is prudent, legal, expected by the shareholders, all that stuff. If you earned it, you pay tax on it and you only get to claim what it cost you. It didn't cost you an additional £100,000 to sell coffee because the Head Office in Estonia charges you for the privilege of selling coffee in Streatham High Street. That is bollocks. Don't bother telling me that a coffee shop owned by a local family can pay more tax and the same coffee shop, if owned by an overseas trading company, can pay less. What possible use is that to UK society? Taxation law needs an overhaul and it needs one massive sea change. The overhaul is that tax authorities need to be able to disregard certain types of tax avoidance schemes - specifically, the ones where tax liability for UK income disappears overseas. The sea change is that tax authorities should be permitted to make retrospective changes to tax law, in order to effectively close tax loopholes. The current game of "whack-a-mole", where top-flight accountants create and sell tax avoidance packages to clients, which work for a year or a few years at a time, get closed down and then get replaced by the next scheme, ad nauseum - this has to end. If a tax loophole can be closed, its closure should be made retrospective. Why the Hell not? Business will soon get the picture and start paying the tax it (morally) owes. Taxation, once again, should not be a game of winners and losers, with the winners constantly ahead in the game because they have circumstances, accountants and money available to them that ensure that the tax someone else would be forced to pay, is something they can avoid. Consider a surgeon. If he could act incompetently, and get away with it through some legal loophole ... time and time again ... would we cheer him on because he was successfully gaming the system whilst technically acting inside the law? No? However, none of this will come to pass because we are at the end of the Nation State period of human history. Superstates coming into existence will end the practice of artificial tax avoidance based upon different tax rates in different countries. This is marvelous news of course and no one will be troubled in the least that all we have to give up in return is any direct connection with democracy.
In this thread I suspect "tax" is used to mean direct taxes like income tax and corporation tax, i.e. tax as a percentage of monies received. There are other taxes. Property taxes on the value or occupation of land and buildings (e.g. rates) are fixed to the location, and cannot be expatriated. Transaction taxes (e.g. stamp duty) likewise are due in the jurisdiction where the transaction takes place. Expenditure taxes (e.g. VAT) are borne by the ultimate consumer, wherever they are situated, not by the producer. Government charges and fees for services rendered are applied on the spot. None of these is very controversial. The real problem lies with Corporation Tax. In the modern world large enterprises operate in many countries, and can easily transfer funds from one country to another. Thus they can arrange for profits to crystallise in whatever jurisdiction they find most advantageous. It is not realistic or feasible to suppose they can be stopped from transferring funds. The solution lies in having a similar rate of Corporation Tax across developed countries. Nations should not be competing to undercut one another to the detriment of all. The EU has been working on this for many years, and may well succeed in due course.
Good job @Loz I would have liked to have seen mention of the fact that when the big hitters are not paying their tax and the Nation still needs to be funded then revenues are sought from indirect taxes VAT, tobacco, petrol etc the burden of which falls on the small hitters that can barely afford their living expenses as it is. TB PS didn't I read one of your posts questioning corporation tax ? which seems at odds with this
The Government writes the rules for paying tax. They also change them if they aren’t producing the results they intended. So what exactly is tax avoidance? Isn’t it not paying taxes which aren't in fact due? The expectation is that people (Individuals and companies) will present their affairs in a manner which minimises tax liability without using artificial constructions (As that would be tax evasion, which is illegal). So if the government aren’t happy they need to change the rules. Voluntary payments to support the less fortunate are called Charitable Donation, which are tax deductible!
I'd like to see a cut off point where charities lost their exemptions/preferable status in regards to tax. Some charities have massive investment and propert portolios with money that was donated to do something to help the vulnerable and not make the charities themselves a very tidy beneficiary
It's a sickness of a dying society with the elite trying its hardest to formulate diversion tactics. At ever opportunity as in everyday is a good day for bad news. As long as the masses are not focusing on those companies & individuals who are remorselessly gathering wealth at an ungodly pace. A reason why the off-shore non tax payers overwhelmingly helped the campaign to leave the EU. Because the european union wants/wanted to close the UK tax-heavens & their ilk around the globe. If you wish to fully understand how evil & vile the british government in power are. Go seek information on the 'integrity initiative' who were funded using foreign aid money. The 'II' aka feeding fake news into UK/Usa/EU nations was designed to co-opt journalists into placing propaganda into media outlets. All the while been paid by uk_fascists with a current focused anti_russian agenda. The government have (torie_scumbags) made it abundantly clear that they will bail out the banks in the next coming crisis. Which will be an orchestrated 'western' (as in UK/USA) event enabling even more funds to be whisked out of thin air. Onto the shoulders of the poor & working classes, with most likely government dipping/stealing individuals assets like they did in Greece. Speaking the truth can actually dismantle pathological hierarchies, to thyn own self be true.
Not sure. Was it me? I have mused upon the legitimacy of corporation tax in the past. This isn't the same thing at all. Corporations are not people, they cannot spend money. The income that they generate ultimately goes to employees, including company directors, who are subject to Income Tax. Income that isn't ultimately subject to Income Tax just gets recycled into company - it's not like the Corporation can buy nice things for itself that it can enjoy. Still, that point is moot. My issue with tax avoidance is nothing to do with the morality or justification of direct taxation, it is the artificial way that tax laws allow for different tax outcomes, based upon purely theoretical business constructs that exist only on paper. Two businesses with the same outlay on materials, wages, rents, and the same turnover, should pay the same tax, regardless of which country the ultimate owner of the business resides in.
Malta are particularly unhappy about the EU idea about having the same tax rates across the EU as they are seen as a country of low taxation, which is why some of the big gambling companies reside there. Not every country needs the same amount of tax so a fixed rate across the union will not work. I agree that businesses that operate in the UK should pay the same tax as every business, but even then it is not even. People who take financial risks and make sacrifices of their time to start businesses, which will ultimately create jobs, which in turn will create more taxes for the government, should be rewarded, otherwise what is the point of doing it ?
We all have a duty to pay the exact amount of tax owed and not a penny more. And that's why I employ an accountant.
The EU has no concern about how much tax a country needs to be solvent, it is only concerned about what its unelected civil service can bleed from the member states to live the life of riley. Bugger, that pushed my button. Andy
