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Tax Evasion; Tax Avoidance; or Tax Planning

For most of the forty plus years since I entered the tax profession it was accepted by tax collectors, tax payers, accountants, lawyers and by the courts, that tax avoidance was legal but that tax evasion was not.

Indeed for centuries the British courts upheld the principal that taxpayers, corporate or individual, had the right to arrange their financial affairs in a manner which reduced their liability to taxation - so long as they did so within the letter of the law. Of course there were instances where there was disagreement between the tax payer and tax collector as to whether some arrangements were legal or not, and these disputes would end up in court. In this way a huge body of precedent law has been established; which is exactly how it should be. It is the job of Parliament to enact laws and the job of the Courts to interpret and apply those laws.

Unfortunately in recent years politicians, unwilling to accept the blame for having misspent the taxes they had been collecting for years, have sought to blame the present financial mess and consequent need for spending cuts on “tax avoiders”. In doing so they have, by ignorance or design, muddied the water by talking about “legal tax avoidance” and “illegal tax avoidance”. When it was pointed out that the second term was redundant as it was actually tax evasion, they moved on to use terms like “unacceptable tax avoidance” or “immoral tax avoidance”.  More recently the term “aggressive tax avoidance” is being used.

Tempted though I am this is not the place for me to get started on “immoral tax spending” which much surely also be a factor! But I must express my anger at the increasingly ridiculous outpourings of the political and media frenzy about tax avoidance in general and by multi-national businesses in particular. For example only a few days ago I heard one EU politician criticising Amazon, Apple and Google for “using island tax havens” and praising David Cameron for calling in representatives of the British Crown Dependencies and overseas territories to take them to task for their role in this “outrage”. Can he really be so ignorant? Those companies and others, e.g. Starbucks, structure their businesses through Luxembourg, the Netherlands, Ireland (all full EU member states) and Switzerland (EEA member).  What has any of that to do with David Cameron or the British Crown Dependencies?

I also accept that artificial schemes of the type utilised by comedian Jimmy Carr and football manager Sir Alex Ferguson are not reasonable (though they seem to be legal) but although there is an offshore aspect to these they were in fact designed by UK advisors and registered with HMRC. Clean your own act up please before you tell the rest of us what to do Mr Cameron.

It’s clear that politicians and the media are struggling to get to grips with the language of avoidance and evasion. It seems that “tax avoidance” is no longer an acceptable term so maybe the time has come for us to start talking much more about “tax planning”. If we accept that “tax avoidance” is unacceptable perhaps we should be promoting “tax planning” as “acceptable tax avoidance”.

Tax planning is nothing new. It has existed for as long as governments have imposed taxes and in doing so built in allowances and reliefs designed to reduce, in specific circumstances, the tax bills of taxpayers. The fact is that it is perfectly possible for individuals and companies, openly and legitimately, to take advantage of a whole range of tax planning opportunities not only to reduce their tax bills, but also to ensure that they comply with national and international regulations, improve cash flow, and build their business or wealth in a sustainable and legal way.

You can read more tax related articles at our sister website - Link4Business


+7 # RE: Tax Evasion; Tax Avoidance; or Tax Planning?Stevie 2013-07-28 07:19
The simple reality is that the UK's business model is failing. "Benefits" have become socialist redistribution of wealth and like all such systems it is bankrupting the country. Politicians of all colours have always relied upon those of us who actually generate wealth to appease the people, and now that their giant ponzi scheme has come to the end of the road they're running scared and desperate.
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