It's time for clarity and leadership on tax avoidance and evasion
Elspeth Orcharton says that politicians and the media need to promote a better public understanding of tax and deliver real solutions.
The media and politicians continue to generate heat and headlines about unsavoury tax practices; but seem to be spreading confusion and trying to humiliate big business and celebrities, rather than implementing effective solutions.
It may be well intentioned, but it's time we heard accurate information, and that there are many, like ICAS members, who favour informed debate and effective solutions. This article aims to set out the clear facts and some pointers as to what is needed.
Let's have clarity on what is actually going on. There are three entirely different reasons why some seem to pay less tax than others.
Successive governments have introduced a range of attractive tax reliefs, or tax "nothing's" into UK tax legislation, particularly to encourage multinational businesses to set up business here, or encourage the wealthy to invest in specific ways, making British films, for example. It's ludicrous, as well as self-defeating to introduce these legal and intended tax enticements and then criticise those who use them.
There is no agreed definition of what tax avoidance is; consider it a spectrum of tax planning on a scale of say 1 to 10, ranging from 1 being the sensible organisation of family finances to use personal tax allowances, to 10 being highly convoluted and entirely tax loophole motivated structures. Tax avoidance is legal as it involves application of the tax laws passed by Parliament. A new law was passed in 2013, since then anything above about a 7 isn't legal anyway and a lot of the current noise is about issues that arose long before that. Where the score becomes "immoral" or "aggressive" is entirely subjective.
Tax evasion is clearly defined, and is unlawful. It includes the deliberate concealment of tax from the tax authorities, and may involve legal or illegal business activities. Businesses seeking cash payments, whilst issuing no invoice trail, is the most common likely manifestation of this on a day-to-day basis.
So three factors are at play, and it's time for leadership to be demonstrated across society to address the core concerns.
Politicians need to be absolutely clear on where they see the balance, between making the UK an attractive businesses location for global operators through the tax system and maintaining the UK tax take.
Politicians and the media need to stop the ranting and witch-hunts; raise the quality of the debate with greater clarity on the facts, actively promote a better public understanding of tax, and deliver real solutions. If they don't, and continue to focus on those who don't pay tax, the greater the risk that many compliant taxpayers wonder why they should pay tax anyway, thus increasing avoidance and evasion.
Ministers and HMRC could explain to voters why tax evasion prosecutions are so rare, and evaluate the effectiveness of deterrents and punishments for tax evasion compared with other forms of cheating the public purse.
ICAS and its members need to continue to inform the public understanding of the situation wherever possible.
And as for Swiss bank accounts? Here are some more facts. Lots of people who work or have worked abroad have them because they are in a politically safe country and are customer friendly. In the 1980's they became trendy, everyone who was anyone in a golf club probably had one. Not everyone who lives in the UK has a tax liability on income from a Swiss bank account, it depends on factors such as tax domicile. Many of the wealthy who 'hide' money overseas do it to keep it from their family or business colleagues, the taxman is their lesser concern.