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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

can someone explain to me the difference between benefit fraud and tax avoidence?

71 replies

OracleInaCoracle · 08/10/2010 15:28

because as far as i can tell, the only difference is that you pay an accountant to help you avoid tax, therefore making it legal. but isnt it also immoral? and certainly no more moral than benefit fraud?

i have to post and run as i have a docs appt, but this is a genuine question, and it'd be nice to have a real discussion on this.

OP posts:
AbsofCroissant · 08/10/2010 16:01

Tax evasion is illegal, tax avoidance is legal, and ranges from things like setting up legit offshore trusts, to having an ISA, to making sure you're not put onto emergency tax when you change jobs to make sure you don't end up paying more than you should.

Benefit fraud is fraud, which is illegal.

HTH

But anyways, as this and all the other threads show, some people are happy to practice tax avoidance (the non-illegal one) to ensure that they do not pay excess tax, while others think that that's immoral.

Out of interest - do those who think tax avoidance is a big no no then choose to pay higher rate tax, and not use things like ISAs?

Litchick · 08/10/2010 16:01

Oh I see - some avoidance is fine and some is not. Who gets to decide then?
Mumsnet jury?

The law is the law. We all use it when it suits us.

nickelbabe · 08/10/2010 16:01

I sell books mainly rather than toys, so that makes me a tax avoider too.
(no VAT is charged on books)

nickelbabe · 08/10/2010 16:02

no, MN jury doesn't dceide - HMRC decides.

and if you're caught "avoiding" tax when you're not allowed to be, you will be charged with tax evasion

hf128219 · 08/10/2010 16:03

nickel I think books will have VAT on them by the next budget!

pagwatch · 08/10/2010 16:04

errr Litchick. Actually when it is the difference between avoidance and evasion we don't get to chose. That would be the jury and M'Lud
One is nt paying tax and the other is buying a evergreen forst in shropshire to claim forestry tax allowances.

( completely made up example)
I would know more about tax law but those guys just party too hard...
Grin

AbsofCroissant · 08/10/2010 16:04

For e.g., when I was at law school, the Cap'l Gains tax paid on the sale of shares (I think that's what it was) was going to go up from 10% to 18% at the start of the next tax year. We were told that if we were in practice, we should be advising any clients that if they were wanting to dispose of a company they own, the best time would be before April (there was actually a massive spike in M&A activity just before this time) to ensure that they didn't end up paying almost twice as much tax on the same transaction.

Is this immoral, or just sensible?

MIFLAW · 08/10/2010 16:04

Nickel

There are clear legal definitions of avoidance and evasion.

So "if you're caught "avoiding" tax when you're not allowed to be" you are not avoiding it at all, but evading it.

Mixing the two terms really isn't helpful.

nickelbabe · 08/10/2010 16:05

hf - they'd better bloody not! Shock

they promised they'd leave them alone

[sits in a corner and whimpers]

pagwatch · 08/10/2010 16:05

we pay high rate and have no isa's. Not moral just fucking disorganized and have no accountant

foxytocin · 08/10/2010 16:05

benefit fraud - poor people do it ergo it is illegal and stupid

tax avoidance - rich people do it ergo it is legal and very clever accounting.

foxytocin · 08/10/2010 16:07

Don't feel left out about ISAs, pag.

Someone in the City said that any financial package which is available to the general public is shit.

foxytocin · 08/10/2010 16:07

package product

nickelbabe · 08/10/2010 16:08

MIFLAW- i was trying not to confuse - that's why I put the avoid in quote marks (to imply sarcasm) - because that's what the claim in court would be - of course it's not avoidance.
I shall reword it:

and if you're caught not paying tax when you're not allowed to be, you will be charged with tax evasion

SanctiMoanyArse · 08/10/2010 16:15

'Out of interest - do those who think tax avoidance is a big no no then choose to pay higher rate tax, and not use things like ISAs?

I don't actuallye arn enough frankly, nor does dh yet.

Although I spoecified hiring a specialist to gfind ways of ntax avoidance I think which is IMO hugely different from not svoiding paying too much isn't it?

Buying the carpet before VAT rise = OK

Geting offshores and loopholes exploied and living your life like AShcroft- not OK

I don't think it's difficult to see the differnece tbh

MIFLAW · 08/10/2010 16:19

Surely, if these methods of avoidance are so fundamentally wrong, it is down to the government to change the laws, not individuals to stop doing it?

Deliaskis · 08/10/2010 16:20

I think it's all been answered, but in response to the original post, as others have said it's about the difference between tax avoidance and tax evasion.

Tax avoidance is roughly on a par with finding out what benefits you are entitled to and claiming them. Perfectly legal, and not immoral, IMO.

Tax evasion is roughly on a pay with benefit fraud, both are lying to defraud the system and the majority of taxpayers. Both illegal and immoral IMO.

D

SanctiMoanyArse · 08/10/2010 16:37

Really MIFLAW? doesn't personal responsibillity come in at all?

That's a bit...... sad isn't it?

mayorquimby · 08/10/2010 16:39

"Deliberately hiring yourself a lawyer to find get outs is immoral"

WTF? how is hiring someone with an expert knowledge on the subject so that you pay the correct amount immoral? People should stop saying "loophole" as though people are somehow cheating the system, they're not. they are paying the exact amount that the system requires them to. How do people not get this? If someone gave you a bill in a restaurant and it said 20 pound when in reality the amount you are obliged to pay is 19 pound it is not finding a loophole to read through the bill and see why you are being charged more than you're obliged to pay. That's all accountants or tax lawyers can legally do. They can't make stuff up or invent new rules, they can only apply the criteria as set forth by the revenue themselves who dictate the terms of the tax system.
People who are doing this aren't cheating or taking money away from the govt or tax kitty because they are paying exactly what they are obliged to pay.

SanctiMoanyArse · 08/10/2010 16:42

There is a massive difference between hiring a specialist to identify your legal obligations and to exploit loopholes to get out of paying anything

My ex had his education funded becuase an accountant advised his family how to make their income disappear for legal purposes (no idea how) so he could get the bursary.

I think we all know what a true loophole is as well; it's not a deliberate clause designed to allow flexibility, it's an unitentional flaw in legilsation that people grab at in order to save themselves cash.

MIFLAW · 08/10/2010 16:49

No. It isn't sad. It's what we have a law for. To stop people punishing others purely on the basis of their own views.

If you go to a market and someone is selling tomatoes at £2 a pound and someone else has them at £3 a pound, surely it is sensible to buy at £2 a pound? Stealing them would be wrong; tampering with the scales would be wrong; telling the stall holder they were potatoes instead of tomatoes would be wrong.

But taking the best deal on offer? Perfectly reasonable.

SanctiMoanyArse · 08/10/2010 16:51

Reasonable but not the most ethical, becuase the next stall might have fairtrade ones.

And I guess that's where we differ (seemingly albeit based upon one post alone); I aspire to ethics above legal.

Otherwise I should claim that extra £100 benefit money I am entitled to, no? Without a care for how it might affect the council and people using the services?

2shoes · 08/10/2010 16:57

did the op mean avoidance or evasion?

smallwhitecat · 08/10/2010 17:01

This reply has been deleted

Message withdrawn

MIFLAW · 08/10/2010 17:04

Otherwise I should claim that extra £100 benefit money I am entitled to, no? Without a care for how it might affect the council and people using the services?

Not "should" - just that, if you did, it wouldn't be unethical. It would be a decision you made based on your own personal interests. FWIW I probably wouldn't take it either - but I would feel even less comfortable with myself if I got on my high horse to condemn someone who did as "unethical." Greedy and thoughtless, maybe - unethical, no.

I have to say that you seem to be confusing YOUR ethics with what is ethical. And, because I fear people who do that, I am more than happy to have a law in place, even if it is a blunt instrument.