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Is it legal

102 replies

newwave · 16/02/2011 16:28

Myself and others have posted items which detail tax avoidance and other money grabbing schemes, I am aware that people from all political parties (and none) do this.

The thing is that it appears to be only the Tories on this site that think this is ok because it is legal and nothing else matters. Others from the left seem to understand that it may be legal but is is also immoral/greedy/unfair etc.

Francis Maude is a prime example, he used the rules to aquire public money but how can anyone defend him as the Tory posters have done, what he did was within the "rules" but it was just plain greedy.

Still "we are all in it together" says "offshore Gideon Gekko"

OP posts:
Mellowfruitfulness · 17/02/2011 21:38

Said in the true spirit of the Big Society, Chil1234! Smile

rabbitstew · 17/02/2011 21:41

Although I guess you could still see ISAs as evil and immoral, if you want society to go back to a system free of money altogether.

Mellowfruitfulness · 17/02/2011 21:42

And no-one thinks you shouldn't manage your money. Just render unto Caesar.

jackstarb · 17/02/2011 22:51

So it looks like what counts as 'immoral' tax avoidance is quite subjective.

ISA's are ok?

How about claiming charity gift aid?

High rate tax payers putting savings in the name of a low rate tax paying spouse?

Or paying the lower rated corporation tax (if self employed) rather than electing to take your income as salary and paying income tax?

Or employing an accountant to complete your tax return and ensure you take all your allowances?

Or is all the above ok as long a you are not really rich (and who decides how rich is that)?

Gosh - what we could do with a standard set of rules to work from.....I know let's call it the 'law'Smile.

Mellowfruitfulness · 17/02/2011 23:02

Obey the law, letter and spirit. Don't use the loopholes. People seem to spend a lot of time and money trying to find ways of avoiding tax. Why not just pay it?

We're talking about huge sums of money if everyone does it. We're also talking about swingeing cuts to hospitals, education, etc. The country's economy is in a mess partly because people are defrauding the state on a massive scale, isn't it?

Isn't that one of the reasons that D Cameron wants a Big Society? To remind people of their obligations?

jackstarb · 17/02/2011 23:17

But Mellow - how do you get people to follow the 'spirit of the law'? That's the crux of it. As long as they stay inside the 'letter of the law' the inland revenue will be forced to leave them alone.

As to loop holes - it's up to the government to close them. Otherwise their use is legal.

Mellowfruitfulness · 17/02/2011 23:18

Agree, Jack. Close the loopholes. If they don't, the only conclusion to be drawn is that they don't want to. Why not, I wonder?

jackstarb · 17/02/2011 23:29

The last government created many loop-holes - most deliberately. This government has been closing some of them.

Governments create 'tax incentives' to encourage certain behaviours. But this often results in 'loop holes' which can fall outside the original intentions. Clever tax accountants are happy to use them to save their clients money.

A tax system would have to be very simple to be 'loop- hole free'. Say, a single flat tax for both corporations and individuals - with no allowances. But for many political reasons - that won't happen.

rabbitstew · 18/02/2011 10:41

EU laws are supposed to be interpreted according to their "spirit and intendment." This terrifies politicians, because they don't always really want what they say to be remorselessly taken to its logical conclusion, particularly not by judges. Grey areas, interesting interpretations and loopholes can be extremely useful to everyone. And of course "immoral" tax avoidance is extremely subjective. What you see as reasonable behaviour is never going to tally exactly with what other people perceive this to be and you are never going to be able to create hard and fast rules even for your own personal code of behaviour.

My general feeling is that the wealthier you become in comparison to the majority of the people in the country in which you live, the less comfortable you ought to feel about avoiding paying your taxes, but you could hardly legislate for that vague feeling, could you, even if you had the power to inflict your own views on everyone else? And it's always going to be a very personal question as to when you get to the point where you feel you have "enough," for yourself, your future and your family, and can afford to be more generous in your views on taxation. It will also be seriously affected by the way you perceive others to be behaving around you - no-one wants to feel they are being taken for a ride, whether by the State or by an individual. And if your rise to wealth in the first place was partially as a result of successfully playing the taxation system, it's not exactly going to be easy to force yourself to stop - it will be an extremely well engrained habit by then to justify everything you keep for yourself as reasonable.

BetsyBoop · 18/02/2011 11:24

jackstaeb talks sense.

One person's tax avoidance loophole is another person's tax efficient accounting practice.

So long as people stay within the law then they aren't doing anything wrong. If the law creates an undesirable loophole then the law needs changing, pointless whinging about people who stay within the law.

Perhaps this is one occasion where a public body should pay the extortionate consultancy rates for the hot-shot lawyers & accountants to ensure they don't introduce the loopholes in the first place...

Oh and for the record, I have an ISA, a pension & use gift aid, all legitimate ways of avoiding/reducing tax, and I don't feel guilty about it at all Grin

rabbitstew · 18/02/2011 12:18

The more wealthy (and therefore powerful)you are as an individual or as a country in comparison to everyone else, the more you get to pick and choose the balance between "exploitation" and "giving something back" - ie the more power you have to dictate to everyone else what is "fair." As a country we play this game on the world stage just as much as the individuals do within it. What is perceived to be fair is, and always has been, quite relative.

jackstarb · 18/02/2011 12:29

Betsy - thanks Smile

Rabbit - I agree with your last 2 posts.

".... the wealthier you become in comparison to the majority of the people in the country in which you live, the less comfortable you ought to feel about avoiding paying your taxes"

But how do we foster this attitude widely? I asked earlier about Scandinavia. I have the vague impression they manage this better than most. But as you also say there is globalisation.....

The alternative is the Dilbert strategy - do a deal and give rich people things they want in exchange for massive tax contributions.

jackstarb · 18/02/2011 12:32

We also have to ask - is it healthy to be so reliant on a very few tax payers for a large slice of our tax revenue?

TheCoalitionNeedsYou · 18/02/2011 13:42

Tax Avoidance is just doing what the government has asked you to do.

rabbitstew · 18/02/2011 14:51

Some tax avoidance is what the government is asking you to do, and some is the government saying "oh, bllcks, we didn't think of that one." Either way, if too many people do it, and do it too well, it doesn't have the result intended for anyone.

TheCoalitionNeedsYou · 18/02/2011 15:06

No - It's all what the government is telling you to do. If they didn't want you to do it they would change the law.

rabbitstew · 18/02/2011 15:10

No, it's not that simple. Big corporations negotiate their tax avoidance schemes on an individual basis and really big organisations can more easily get what they want because of their financial muscle and threats. One organisation may be permitted to organise its affairs in a particular way that is not allowed in a smaller organisation with less negotiating power. It's more about expediency than what the government wants some of the time.

rabbitstew · 18/02/2011 16:06

And there is a difference between what the Government actively promotes (eg ISAs to attempt to encourage the profligate to save more money) and what they hope most people won't bother with or notice.

Mellowfruitfulness · 18/02/2011 16:15

It should all be more open and transparent, imo. But no chance of that when so many people make so much money out of it.

Seriously, though, the government have some face forcing us to take the cuts while not bothering to close the loopholes, don't you think?

Interesting reading your take on all this, btw, Rabbit and Jack.

TheCoalitionNeedsYou · 18/02/2011 16:21

You can never have any idea what the government intends. You can only know what they claim their intentions are. Action is everything. Only what they do matters not what they say. Tax law is one of the things they do.

rabbitstew · 18/02/2011 16:47

That's not the same thing as saying "tax avoidance is just doing what the Government has asked you to do," though, is it, TheCoalitionNeedsYou? Permitting something is not remotely the same thing as asking you to do it.

rabbitstew · 18/02/2011 16:53

Although it is, of course, a slippery slope.


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TheCoalitionNeedsYou · 18/02/2011 17:17

When you know that their are entities (Public Limited Companies) whose rules require them to find a way to pay as little tax as possible, then you know that every way that is permitted to be taken to reduce tax will be taken, so in effect you are telling them do do do.

It's like saying that by digging a canal you are only permitting the water to flow from Liverpool to Manchester, you're not encouraging it to do so.

CinnabarRed · 18/02/2011 17:25

I get what you're saying OP - you're asking why tax avoiders feel justified in doing what they do purely because it's legal. You think legal doesn't equate to moral, and I agree. There are loads of things that are legal but not moral - adultery for one.

I'm a tax policy adviser to governments around the world, and FWIW a lifelong labour voter.

I believe in three fundamental principles of taxation:

  1. Source taxation: the UK should tax income arising in the UK (and no other) and allow relief for expenses relating to the UK income.

  1. A taxpayer should be taxed on the underlying economics of it's transactions (and not some fictional reduced tax profit or increased tax loss created by a loophole).

  1. Parliament drafts tax legislation, the Revenue administer it and the courts interpret it. It's dangerous if any one starts working outside its remit.

I use these 3 principles when reading tax avoidance cases. Most of the time, I'm left with the conclusion that the taxpayer involved isn't behaving very well and I find that very distasteful. However, in a surprisingly high number of cases (perhaps 25%) I conclude that the taxpayer is operating within the spirit of tax policy and the intent of parliament, even if it's not the way the Revenue would like the world to be.

It might surprise you to know that I support Vodafone, for example. I'm happy to explain why if people are interested (once the children are in bed!).

But my main point is this: all the available empirical evidence shows that the least compliant taxpayers AND the ones most likely to underdeclare income/over claim expenses AND the ones most likely to commit tax fraud, are the small businesses whose tax bills make up the OTHER 50% of our tax revenues. Not the rich.

Obviously I can't say whether all those small business people vote Tory or Labour....

Very well paid employees who make up the vast, vast majority of the top 10 are generally very tax compliant because their tax is collected via PAYE.

The mega wealthy aren't generally tax resident in the UK so aren't obliged to pay tax in the UK. Footballers are the main exception.
TheCoalitionNeedsYou · 18/02/2011 17:35

I WOULD like to know more about the Vodafone thing.

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