Decision Time: The tax avoidance issue

 
Policemen outside Fortnum and Mason In March police arrested 145 people for staging a sit-in at London's luxury food store Fortnum and Mason

With the country facing a squeeze, with tax rising and spending being cut, the demand that companies and the rich should pay what they owe grows louder and louder.

You don't have to be one of those who occupied Topshop or Fortnum and Mason to wonder why the taxman can't get his hands on billions of pounds shielded by offshore schemes and onshore wheezes.

But on the other hand, you may worry whether Britain really can afford to increase the taxes paid by those who create wealth and jobs and who are, after all, minimising their tax bills quite legally.

Could the final cost of a crackdown on tax avoidance be higher than the bill of letting it go on?

A new series of Decision Time on Radio 4 examines decisions that could face any government at this time - whatever its political colour, and examines how and whether an idea might make its way through the corridors of Whitehall and the chambers of Westminster.

Tonight, a former head of the Inland Revenue, a campaigner against tax avoidance and a champion of business discuss whether ministers could and should tackle tax avoidance.

The programme commissioned a poll on the subject which reveals that in general, people (84%) think that the government should crack down on tax avoidance in the UK.

Even if this causes unemployment or companies to leave the UK, the majority (60%) still believe the government should crack down on this practice.

However, opinion is split over the role of companies in minimising tax, through lawful means, in order to maximise returns to their stakeholders - highlighting the tension that tax avoidance brings for companies.

Decision Time is on BBC Radio 4 at 2000 GMT and will available online after broadcast.

 
Nick Robinson Article written by Nick Robinson Nick Robinson Political editor

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  • Comment number 93.

    This comment was removed because the moderators found it broke the house rules. Explain.

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    Comment number 92.

    The easiest way to crack down on tax avoidance is for govt to write better legislation. Tax avoidance is simply people taking advantage of tax legislation in a way (or in amount) not anticipated by politicians and HMRC.

    Politicians have made tax so complex that unanticipated effects are inevitable. Do not blame the tax payer for this

  • rate this
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    Comment number 91.

    Haye@ 89
    You can crack down on tax avoidance by tightening up the legislation.

    I don't think anyone has suggested punishing people who legally avoid tax, have they?

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    Comment number 90.

    JH66 @ 81 There's no watertight definition because it isn't a precise term. But don't fall into the trap of thinking that a concept is invalid just because it can't be precisely defined. Anyway, to me, tax avoidance means reducing tax liability by means which are currently not illegal but which might be viewed as a misuse (or more neutrally an unforeseen use) of the existing tax regulations. OK?

  • rate this
    +1

    Comment number 89.

    You can't "crack down" on tax avoidance. It is simply impossible to punish people for not breaking the law.

    You can either create more legislation to close the avoidance loopholes. Or you can make avoidance less attractive in other ways.

    But lets consign to the dustbin this idea so many seem to have that avoidance should be punished. Its illogical and ignorant.

  • rate this
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    Comment number 88.

    No85 BluesBerry,
    You draw attention to massive corruption by US banks. In view of the global nature of modern banking do you think the same is happening in the UK? Do you think the City of London Corporation is the right institution to sort out any wrongdoing.

  • rate this
    +1

    Comment number 87.

    46.lefty11
    I disagree; it’s not about the richest VS the poorest; it’s about the richest VS the rest of us.
    The richest saw their assets grow by over 18% this year & salary rises for Top Bosses grew by over 32%.
    Recession - what recession?
    Are we not supposed to be all in this together?

    http://www.bbc.co.uk/news/uk-13321462
    http://www.bbc.co.uk/news/business-13588114

  • rate this
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    Comment number 86.

    Methodolgies include wire-transfers, e-banking & pre-paid cards. Convergence of net with banking facilities has changed the way in which funds can be laundered. Increasingly criminals leave money online & convert back to ‘real’ money when needed, and it is never needed to pay taxes.
    Solution to this HUGE problem would lead to mega-bucks, but the size of the corruption boggles the mind.

  • rate this
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    Comment number 85.

    Bank of New York was fined $38M in 2005 after 6-year investigation of fraud - money laundering involving Russian & US bank accounts. Bank admitted had not adequately monitored & reported suspect accounts. With penalties like these banks are incentivized to look the other way. Launderers are usually professionals with in depth knowledge of law & finance than the enforcement team.


  • rate this
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    Comment number 84.

    Recently, banks have been implicated in major money laundering scandals. One of most shocking involved Miami-based Wachovia Bank, which admitted responsibility in 2009 for moving $420B for its account holders.Wachovia’s disregard for our banking laws gave international cartels a carte blanche to finance their operations. Penalty: $160M, less than 2% of the bank’s $12.3B profit 2009.

  • rate this
    -1

    Comment number 83.

    The article refers to 'offshore' and by implication the 'shadow banking' industry. It is alleged that the City of London and Wall Street are the world's major location for trillions of dollars deposited by international drug dealers, middle east royalist tyrants, dictators, fraudsters and despots of every shape and size. Is the City of London Corporation involved in any way? Inquiry now!

  • rate this
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    Comment number 82.

    Interesting point: Global Financial Integrity Project has concluded for every dollar of aid given to developing countries, $10 flows into corruption, multi-national company tax evasion & straight out fraud.
    The capacity of financial centres to carry out illegalities makes them "useful" despite the PERCEIVED regulatory initiatives.



  • rate this
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    Comment number 81.

    #65 pd65

    You're a thinking member of the political left.

    Go on then, surprise me, provide a definition of tax avoidance that would survive the examination of an intelligent audience.

  • rate this
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    Comment number 80.

    Money laundering is global problem. Infuses billions of black money into the stream of commerce & business, corrupting financial institutions & officials.
    This is not petty cash; it's Trillions. If we could tackle this black market, it would not be a pretty picture re financial institutions. It's a bigger issue than evading taxes via offshore banking, though both are hugely problematic.

  • rate this
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    Comment number 79.

    I#59 pd65 wrote: "I'm all for redistribution through the tax system - who wouldn't be?"

    The tax system is for providing functions that should be provided by the State (and I include public services). In providing these services the wealthy will inevitably, and rightly, pay more. But this is not the same as redistribution.

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    Comment number 78.

    So WPP repatriated to the UK after the last budget business tax reductions. How many jobs did they repatriate? Not many as they only had a corporate office in Dublin employing about 36 people. If a company want to do business in a country they need to employ people close to the marketplace. Make it more expensive for them to go off shore, stop transfer pricing of goods and services.

  • rate this
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    Comment number 77.

    #75

    Never thought I'd see the day. Bobbin Robin is an anarcho-communist!

  • rate this
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    Comment number 76.

    Tax avoidance covers a multitude of practises. It is 'wrong' is when the people involved abuse the terms of the tax laws in order to benefit from things that exist to serve other purposes.

    To 'crack down' on it is simple. Employ tax evasion specialists and change the law to suit. Or if HMRC are incapable of that then maybe a flat rate tax will suffice, with a rebate for certain circumstances.

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    Comment number 75.

    Tax is theft.

  • rate this
    +1

    Comment number 74.

    bass@71
    Yes, people can fall on hard times; I think the state should help them out. Not sure that parents splitting up should (in an ideal world) alter the financial situation of the children - who after all still have two parents. Attempts by the last government to pursue biological fathers and hold them to account were controversial but I think justified.

 

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