Remember the discussion about tax avoidance being legal on the benefits thread?

[LadyBiscuit]

I was shouted down by a lot of people who said that it was okay because it wasn't actually illegal and benefit fraud cost the UK a lot more. The HMRC estimates it costs us £14bn a year. Kind of puts benefits cheats into perspective a bit doesn't it?

"but if someone 'works' the benefit system, by moving out from their partner's home to live down the road with their children, and claim single parent benefits, would that that illegal or immoral or neither?"

It's not illegal and I would say it is amoral as the benefits system has nothing to do with morality. It allocates benefits for being a single-parent, it doesn't state what the circumstances or motivations (if there are any) are which lead to you being a single parent. It simply provides a definition of single-parent and what said person would be entitled to, if you fall within the definition then you are entitled to the money.

So none of you feel remotely uncomfortable with Lord Ashcroft's arrangements?

Of course not. I would move off shore if the tax situation here were too onerous for me on a personal basis. These people who are criticised for saving tax tend to make so very much money for this Government which then goes to the pioor that they should be getting hero medals rather than villified by the jealous poor.

I'm not overly familiar with them could you give me the broad-strokes.

Well yes Xenia I didn't mean you, obviously. We've all long since given up any hope that that particular stuck record will ever move on.

Details here.

nope. can't see anything wrong with that in the slightest.

I'm just wondering where people are finding a moral duty for people to pay more than what their share is,as deemed by the laws and criteria which govern taxation.
Do these people look at their tax bill at the end of the year and say "well that is the share I'm required to pay based on my taxation criteria and circumstances and as such I will pay X amount more as it is immoral to only pay what the system requires me to pay. I must pay over and above what I'm deemed to owe for it to be moral."

@mayorquimby... that function is what charity is for. You pay the tax due in order to meet your legal obligations and if you feel compelled to give more of your money to society for moral or personal reasons you make charitable donations on top.

"It's neither illegal (as far as I am aware) or immoral surely. People are perfectly entitled to arrange their own affairs to achieve optimum financial benefit."

Well, I agree with you, it's a legal loophole, I think at the most there might be a grey area if it could be proved she moved out solely in order to be able to claim, though surely this is unprovable.

If a single mother on benefits lets her ex-partner move back in without informing the benefits office, then this is illegal (since AFAIK people have been prosecuted for this), but the net effect is again that the state is supporting two households instead of one - but this time under the same roof. Is this example immoral?

(I'm not leading up to anything with this btw, I don't understand tax well enough to try & prove some complicated analogy! I promise I am just trying to understand the crossover between illegality & immorality & amorality...)

exactly. That's why I'm wondering how others claiming that a person paying what they are legally obliged to pay in terms of tax are immoral because they are only paying what they are required to pay rather than paying more for no reason in particular.
I especially like the claims that they are somehow taking money away from the government which makes no sense. If they don't owe the govt. the money and the govt has no legal entitlement to it then how are they taking it from them?

"Well, I agree with you, it's a legal loophole"

In what way would you describe it as a loophole? It's simply the law, it's not a situation which the law has missed or failed to cater for, it's dealt with by the existing law.

"trying to understand the crossover between illegality & immorality & amorality"

Illegal would be lifting a £10 note from someone's pocket. That's theft.

Immoral would be seeing someone drop a £10 note and pocketing it rather than going after them to return it. Doesn't contravene any written law but morally it would be right to try to return it.

Amoral would be finding a £10 note in the street with no-one around to ask if it belonged to them and deciding to keep it. Not contravening any written laws and no obvious morality at play either.

Illegal in the benefit/tax example would be lying about your circumstances for personal gain - straight old-fashioned fraud. Stay within the rules but stretch the interpretation and occasionally this will be tested against whether you have complied with 'the spirit of the law'. Tax accountants are generally devoid of spirit :)

I think there's about 4 levels of tax "minimising" (am trying not to use a technical term).

Level 1: Using schemes that have been deliberately set up by the govt to allow people to pay less tax. For example ISAs, pensions, VCTs. Nothing morally wrong with taking advantage of these schemes, as that is exactly what the intention was behind them. Not illegal either obviously.

Level 2: Arranging your life in a way that you otherwise would not choose to do, simply because it is more tax-efficient. For example, Xenia's hypothetical couple who choose to each work part time rather than one full time and one SAH if they have only made that choice because of the tax consequences (i.e. they would actually prefer to have one SAH and one F/T if the financial effects were the same). I don't think this is morally wrong but I do think that the tax system should aim to avoid these sorts of "unintended consequences" wherever possible - so it should be tax neutral whether you have two P/T spouses or one F/T and one SAH. (Tricky, I know).

Level 3: "Sailing close to the wind" or using "loopholes" which were clearly not intended for that purpose. For example, the presentation of bonuses as "loans" which are then written off, so a lower rate of tax applies. Or putting a purchase of a new computer down as a business expense when you'll mostly use it for personal reasons. Morally wrong IMO, although legal.

I would also put in this category facilitating other people's tax evasion i.e. paying in cash in return for a better rate/price.

Level 4: Outright tax evasion, i.e. putting money in offshore accounts. Morally and legally wrong.

Tax evasion and putting money is offshore accounts is not the same thing. It can be perfectly legal to move your money offshore.

Should say 'putting money in offshore accounts'

"Immoral would be seeing someone drop a £10 note and pocketing it rather than going after them to return it. Doesn't contravene any written law but morally it would be right to try to return it."

ah but that would be theft also, so it would also be illegal (in ireland anyway, pretty sure our definitions of theft are the same.).it's a murky area indeed.

Durn that irish sense of fair-play... :) How about if you're given change for a tenner in a shop rather than for the fiver you handed over?... and opt to keep the extra £5 rather than owning up to the mistake... is that technically theft too?

Putting the home computer down as a business expenses is not a 3. It's a 4, simply illegal. But yes those categories are good.

I agree with this.
"exactly. That's why I'm wondering how others claiming that a person paying what they are legally obliged to pay in terms of tax are immoral because they are only paying what they are required to pay rather than paying more for no reason in particular.
I especially like the claims that they are somehow taking money away from the government which makes no sense. If they don't owe the govt. the money and the govt has no legal entitlement to it then how are they taking it from them?"

The Government if it wanted could make tax a lot simpler as I've suggested above. As they choose not to people haev to wrestle with it as it is and pay the minimum tax they are legally obliged to do. Obviously if they want to pay more they can do so. I met someone who was payign his wife about £12m on the divorce (so not poor in any sense) but very left wing and he pays more tax than he can and doesn't claim the full expenses he might because he wante more money in Government coffers. He's just about the only person I've ever come across in that category and I'm not sure he's morally right to do it.

Can't remember. Possibly not as it was given to you.
Off the top of my head (haven't studied theft based offences in a little while so am glad to be corrected) it's dishonestly appropriating anothers property with the intent to deprive the owner of it (even if only temporarily).
So if you picked up a tenner knowing it wasn't yours with the intention of depriving the owner of it's use and keeping it for yourself that would qualify. Not sure what the standing would be though if, as in your scenario, somebody handed you more money than they owed you by mistake when the mistake is theirs and theirs alone. Could well be outside the bounds of the legal definition but would as you say be immoral.
Need someone more versed in that area of law than me.

mayorquimby - I suppose I think of it as a loophole in that they are living apart (with separate finances) soley in order for one party to be able to claim benefits, but in all other respects they are a couple - for instance eating together at each others houses, going on holiday together etc.

But AFAIK it is legal as they haven't lied on any form, and single people can go on holiday with whoever they want to.

Having read minipie's post, I think perhaps it is more that they are (legally) maximising an unintended consequence of the system.

But I think it's a bit rough on the woman who 'forgets' to tell the authorities that her boyfriend has moved in & keeps claiming benefits as a single person & then gets clobbered, as I doubt she feels more immoral than my friend, even though in her case it's illegal. And in her case, evidence of an extra toothbrush by the bathroom sink, a man coming & going, shared grocery bills could be used to prosecute her.

Is it logical to say she that she is (illegally) trying to minimise the unintended consequences of the system favouring single parents?

Mingg ok fair enough, there are ways to do it legally (though also often illegal). Maybe it should be in category 3 not 4.

A better example for 4 would be declaring less income than you've earned.

"mayorquimby - I suppose I think of it as a loophole in that they are living apart (with separate finances) soley in order for one party to be able to claim benefits, but in all other respects they are a couple - for instance eating together at each others houses, going on holiday together etc."

but that's the same as any other couple who don't live together and is envisaged and catered for by the existing laws. while it might not be the most romantic or ideal situation that people may make decisions on their relationship based upon finances it happens everyday in ways which nobody would question or blink at.

OK - maybe not a loophole then...

The second example (the benefit cheat) - is it wrong just because it breaks the existing laws?

Thank you minipie, that's very clear. I have an issue with people who do 3 and 4. I accept that xenia's argument is that if you can get away with it, then you're not actually breaking the law, but simply paying more tax than you actually have to.

And is it all the HMRC's fault or is that tax jurisdictions are all so different that it's impossible for them to close every loophole?

A lot of it is the fault of the people that frame the tax laws. You've only to look back at the cock-up when Brown abolished the 10% tax band... If enough people had run enough 'what ifs' through the new rules they'd have instantly spotted that a lot of relatively low-paid people were going to be worse off. Imagine how wrong they can get it with more complicated changes!

Some tax laws are deliberately designed to encourage particular behaviours. When CGT is tapered to be lower over time the effect is less short-term profiteering and more long-term investment. When CGT is lower than income tax, the intelligent investor will convert cash deposits to assets like property.

Tax experts, ironically, know more a lot more about the tax regulations than the people running the HMRC because their job is to find ways to save their clients money. If the Exchequer could replace a few HMRC mandarins with these tax experts we might start getting somewhere.