Tax evasion and avoidance

Warning - rant ahead :slight_smile:

The current reporting on the “Paradise Papers” http://www.bbc.co.uk/news/live/world-41879690 is really annoying me.

No-one, from politicians to journalists to the “man on the Clapham omnibus” seems to be able to differentiate between use of legal schemes to reduce one’s tax burden and illegal hiding of income and assets from the HMRC with a view to fraudulently avoid paying tax.

Why are people so &^%£$€!!! stupid?

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Hi Paul

I feel your pain!!

It’s lazy and uninformed to lump the two things together. Even the apparently educated and intelligent politicians don’t seem to understand the difference. Maybe they are just jumping on the bandwagon of public opinion to make themselves more popular, although I imagine they have all indulged in some light tax planning in their lives.

Also what annoys me is the ridiculous phrase paying your “fair share” of tax. Fair by whose reckoning? Who decides?

Oh my goodness you’ve got me started …

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For me the issue splits into two things
Tax Avoidance - pay less tax through legal means, and,
Tax Evasion - paying less tax by hiding items that should attract tax.

In my mind, most people practice avoidance, e.g. offsetting business mileage against monies recieved for fuel. Everybody does it, it’s legal and there’s no issue.
Evasion, is a cheat against society and illegal. People that knowingly follow this route should be punished.

The problem arises when we have casessuch as this


where a few people have exploited a scheme and come out better than when they went in. I would have invested too if I’d got the good financial advice and could have made a ‘few quid’ for my children. The issue is that the anger is directed at those who took advantage of the scheme whereas iot should be directed at the law-makers who created rules that allowed such a scheme to be set up in the first place. If those rule-makers did a similar thing (c@ck-up / stupid idea without thinking it through) whilst working in the private sector you can be sure they wouldn’t be on the list for ‘merit award/bonus’.

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I think that part of the problem is that “tax avoidance” sounds just as shifty as “tax evasion” - a better term might be “tax planning”, but that does not seem to have caught on.

Almost everyone takes part in tax avoidance schemes - let’s try this one.

“If you pay into this scheme then no income tax needs to be paid on the money invested, nor is any tax taken on capital growth within the scheme. Once you have paid in for a number of years you may take a portion of the funds accrued as a lump sum with no tax to pay and use the rest to invest in further approved schemes to generate income”.

Sounds dodgy eh? Robbing the NHS and the schools for sure!

Or is it a pension?

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I see that Mr Corbyn has asked the Queen (and others) to apologise for legally investing wealth ‘offshore’ but doesn’t think he needs to apologise for appointing an MP into his cabinet who he knew had allegedly behaved inappropriately with a woman.

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Indeed, Corbyn has a fair few skeletons in the cupboard, even if none of them are related to his personal tax affairs.

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I’m not exactly a royalist myself but I have sympathy with the queen on this one as she is between a rock and a hard place.
When we had ISA’s and other investment funds before coming to france, you leave matters in the hands of your fund managers who make the choices of what will provide the best income from your money. That’s their job after all. I doubt if I ever looked at which companies or whether they were UK based or not in our portfolio. The Duchy of Lancaster is responsible for handling her investments and on the other hand, if they invested unwisely with poor results, would they not be criticised for using her money unwisely?

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In reality the UK has one of the lowest ‘tax gaps’ in the world and most of it is down to evasion, criminal activity and the black economy. Tax avoidance (whilst repugnant) is a tiny fraction of the tax revenue loss but makes great headlines and stirs up the voting public. Closing every current tax loophole would take years of Parliamentary time in law creation during which time accountants would come up with different schemes and the cycle would start again, I would rather see HMRC employ more compliance officers which has instant results.

Criminal activity is funded by drug use. All people who buy drugs should be made aware that their weekend habit funds people trafficking, prostitution, slave labour, extortion etc.
Also, boards of directors have a fiduciary duty to do the best for their shareholders and until these gaps are closed, or corporation tax is at a level which makes it not worthwhile to take all these convoluted steps, multinational companies will be forced to continue nin the same vein.

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There is a theory that the preferred continuation of tax avoidance is what has fueled the push to leave the EU. Nearly all the worlds main tax havens are UK protectorates. Its in the UK’s interest to keep it this way, which is obviously why every British government since the year dot has done nothing whatsoever about it. The EU’s preferred way forward is that every member state has similar tax rules and tax avoidance becomes impossible.

A few years ago I was driving to work listening to BBC Radio 4. They were talking about a tax efficient investment scheme that would benefit the British film industry. It was perfectly legal and sounded too good to be true. They then went in to point out that all the ‘places’ on this scheme had been taken up by well known sportsmen and A list celebrities. The normal man on the street did not get a look in. The also quoted how much Wayne Rooney had paid in income tax the previous year. It was less than I’d paid. How? He earns more in a year than my close family will earn, collectively, in their lifetimes yet paid less tax than a public employee. There is something very wrong with our world.

I’m equally appalled at the suggestion that Lewis Hamilton (F1 racing driver) has been avoiding UK tax and VAT by basing his expensive jet and motor home in the IoM.
Cant people understand that whilst he is regarded a british racing driver, he lives in Monaco so what’s that all about?
I think its just a press feeding frenzy because quite frankly, there’s bugger all else to have a go at at the moment other than trying to divert attention away from the parliamentary sleaze balls and the brexit f*ck-ups :smirk:

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The thing is that the UK benefitted from information about overseas assets being reported to HMRC - there was a brief semi-amnesty (i.e just pay the back-tax with no punitive charges) a few years ago.

Increasing globalisation means that there are increasingly fewer places to simply hide money - even the Cayman islands signed up to passing information back to “home” tax authorities in the USA & UK.

Hiding funds overseas and not paying tax on the proceeds of any investments there has always been illegal, by the way.

Hi David,
this is another good example of a legislative that seems geared to keeping the rich rich.

The issue seems to be around the scale of ‘tax offset’ and the perception in the minds of most people about what is a fair amount to pay.

So just looking at Income Tax;
Case 1, I can guarantee nobody on this forum decides to waive all of their tax allowances and voluntarily pay tax at 100% to their tax authorities i.e. give the whole years income to the tax man. If anyone gets on a moral high horse about ‘we should all pay more tax’ then they can feel free to write cheques to the tax authorities - I don’t expect many to do so.
Case 2, I’m happy to bet that everyone on this forum who pays income tax takes their allowance of deductibles e.g the first xxxx EUR are tax free, the next yyyy at zz% etc
Case 3, I for one (but I suspect many fall into this) include items in my tax return that I’m entitled to, eg I claim back tax on charitable donations made through monthly standing orders. I also offset business miles driven for work against the benefit cost of fuel supplied by my employer. It’s purely legitimate to do so and I’d feel pretty aggrieved if anybody said that reducing my tax bill by small amounts such as these were repugnant.

Then we get to the more interesting parts;
Case 4, someone employs an accountant to do the same as Case 3, a Joe Public using an accountant to keep the tax bill down - it seems fair enough and therefore not repugnant but we end with a situation where
"The also quoted how much Wayne Rooney had paid in income tax the previous year. It was less than I’d paid. How? He earns more in a year than my close family will earn, collectively, in their lifetimes yet paid less tax than a public employee."
I agree with David’s comment that there is something wrong here but the problem is more with the system than the individual.

Let’s move on to more
Case 5, people buying and, shuffling assets around through legal financial schemes and leasing back the same assets to avoid a £3m VAT Payment

Case 6, Apple moving assets (including the intangible IPR - Surely IPR should be taxed where the employees thought it up???) to reduce their tax bill by circa 8 billion USD per year.
At this end of the scale I’m upset to see systems being abused and poorly policed but can’t help think that someone somewhere is letting this go on.

What is repugnant about planning one’s affairs so as to (legitimately) reduce one’s tax bill.

I shop around and make use of special offers to reduce my grocery bill - is this any different; am I somehow stealing money from the supermarkets when I do so?

As I said above anyone who invests in a pension or an ISA is engaging in “tax avoidance”.

Corbyin is wrong, of course - it is not the case that there is “one rule for the rich and another for the rest of us” - the rules are the same. What does tend to differ is the accessibility - to take advantage of a tax efficient investment you actually need to have cash to invest and sometimes there is a minimum buy-in.

Many schemes are intended to benefit industry by encouraging investment - that can directly benefit people in terms of jobs etc. The attraction is, of course the prospect of high returns, the sweetener a tax break but do not forget that the resulting investments are high risk - you need to be wealthy enough to have a finger in many pies to spread the risk.

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It can sometimes be possible to get a larger tax break than money invested with the result that you pay no tax overall (or even get a refund).

However it does not look like some of his choices went well for Rooney http://www.dailymail.co.uk/news/article-3829833/Wayne-Rooney-s-tax-bill-avoidance-scheme-5-MILLION.html

The bottom line is that some of these schemes are dodgy and, essentially, tax evasion rather than avoidance - HMRC check out schemes and sometimes (in fact fairly frequently) decide that they are not within the rules (and the real scandal in all of this is that HMRC staff have been cut so there is less manpower to do the checking).

According to HMRC “Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended”. So using an ISA for example would not count as tax avoidance. When you look at the some of these schemes they are clearly not using the rules as intended, but sadly that does not make them illegal. That is what makes people mad because you know that people are getting away with something that is wrong because either nobody has worked out how to make it illegal, or nobody has bothered to do so.

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It’s not about rights and wrongs it’s about basic outlook on life. Despite living through the Thatcher years when I first became aware of the haves and the have nots my philosophy for life is comfortably to the left of centre. I believe in society, a society that provides a good level of health care, law and order and education, a society where there are jobs that pay living wages and where people are sufficiently taxed on that income to drive the country forward. I was a higher level tax payer but never minded that as I always enjoyed a comfortable standard of living. What I really dislike is the me, me, me society where nothing beyond their immediate family’s welfare is important. I played rugby with a lot of people who commuted to London and others who drove white vans and ducked and dived in the local area. I heard all the tricks, all the short cuts, legal or not and none of them impressed me. Brexit supporters may hope that they will be able to take their country back to the good old days but they will never take it back to the time when people were prepared to, through their taxes, fund a society that they believe they are owed. No British government these days will put their neck on the line and try to win an election on economic truths, it’s far easier to sit on the fence and make false promises. A lot of moans on expat forums are posts by self employed people who after moving to France were surprised by the amount of taxes under various guises they were expected to pay to the state, they had been used to the British system where tweaked employment figures were more important than paying their way.
The rules for tax avoidance are in place and morally right or not people have the right to take advantage of what they offer. Shaming them in public is only a good idea if it opens up a future where these loopholes are closed and those lucky enough to have benefited at the expense of others for so long are made to pay their way.

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I agree with some of the points you’ve made David but there are also many people/families that want to make as much money as possible or sufficient sums to allow for a very comfortable lifestyle and are more than happy to donate money, time and services to charities.

The charities that are there plugging the gaps in a society struggling through under taxation.