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Is avoiding tax immoral?

Robert Peston | 09:13 UK time, Monday, 20 September 2010

Danny Alexander

For most companies and many wealthy individuals, what Danny Alexander said yesterday about tax avoidance was both shocking and potentially very significant.

It repays reprinting a significant chunk of the Treasury chief secretrary's address to the Liberal Democrats' conference:

"Just as it is right to ensure that every benefit is fully justified, so we must ensure that every tax bill is paid in full. There are some people who believe that not paying their fair share of tax is a lifestyle choice that is socially acceptable. Just like the benefit cheats, they take the resources from those who need them most. Tax avoidance and evasion are unacceptable in the best of times but in today's times it is morally indefensible."

I am sure that many of you would agree with him. But "tax evasion" is illegal whereas "tax avoidance" is not: tax avoidance is the use of lawful devices to reduce taxable income and thus the tax payable to the Exchequer.

Now, there are plenty of individuals who see tax as just another of those irksome costs of doing business, such that they would be certifiable if they didn't do all that's necessary to shrink their tax bills. They would take the view that if they're not breaking the law in reducing the tax they pay on their income, then they're doing nothing wrong.

As it happens, a good number of donors to the Tories - Mr Alexander's partners in the coalition government - have engaged in what they would see as sensible mitigation of tax and what Mr Alexander might well see as hideous avoidance.

So I shall be interested to see the performance of the Tory chancellor, George Osborne, at the Conservative Party conference: will he use the same, tub-thumbing puritanical rhetoric in lambasting those who would rather pay substantial sums to specialist tax advisers, who minimise their tax bills, than hand that extra million or several to the public coffers?

Which shows, of course, that there is a very simple thing that the chancellor and chief secretary could do - at a stroke - to shrink the tax avoidance industry.

They could simply put a ban on giving public-sector work to any auditing, accountancy or consulting firm that has a tax advisory unit. Gosh, that would present the big four accounting firms with an intriguing dilemma.

All that said, quite a few business leaders and entrepreneurs would make a moral case for not paying tax: the less tax they pay, the more they're able to invest in job-creating opportunities in the UK, they would say.

In other words, there is a fine line between taking advantage of tax breaks explicitly created by the government to meet some kind of economic or social purpose and taking cynical steps to deprive the state of its due.

Would Danny Alexander, for example, take the view that most venture capital and private equity firms are behaving in a morally indefensible way, by financing their ventures with so much debt that interest payments wipe out most of their taxable profits and much of their corporation tax liability?

And what about the one man private-equity firm, Sir Philip Green, the owner of Top Shop, BHS and a fair chunk of the rest of the high street.

He would argue that the UK has benefited from the way that he's improved the efficiency of this substantial consumer-facing business - which is presumably why Mr Alexander and the government are using his talents to advise it on how to make the public sector more efficient.

But in 2005 Sir Philip saved himself around £300m in tax on a £1.2bn dividend from his main company, Arcadia - because Arcadia is registered as owned by his wife Tina, who is resident in the tax haven of Monaco.

Also the £1.2bn dividend was financed by increasing the indebtedness of Arcadia, which reduced the taxable profits of Arcadia and therefore the taxes that it pays (although Sir Philip has consistently argued that he chose not to load up Arcadia with as much debt as he might have done, so that he demonstrably pays more corporation tax than private-equity competitors).

None of that is a secret. And none of it is against the law.

But does Mr Alexander think that Sir Philip was engaging in laudable tax planning or showing a repugnant refusal to pay his way in the UK?

Where the line is drawn between acceptable and unacceptable tax behaviour is certainly not easy - but it is a big deal.

If a FTSE 100 company has a tax rate less than the headline rate of 28% is that evidence of an ethical crime against the state?

This would be quite something - in that most businesses, including the UK's largest public companies, believe they are letting down their owners, their shareholders, if they don't use and exploit every legal means to reduce the tax they pay.

In fact the advice to directors of public companies is quite clear: they are failing in their fiduciary duty if they allow their businesses to pay more tax than necessary. Which is why it is such a live issue in many boardrooms whether they should relocate the legal homes of their respective companies to countries where taxes are lower.

Perhaps Mr Alexander would direct his condemnation more against individuals who reduce their tax rate than against businesses. That's certainly the implication of the Treasury's announcement that it will endow Revenue and Customs' enforcement teams with an additional £900m of investment so that it can scrutinise the tax returns of the 150,000-odd individuals liable to the new top 50p rate of tax.

But at the upper end of the wealth and income scale - and Sir Philip Green is one of many cases in point - the distinction between individuals and businesses is a fuzzy one.

What Mr Alexander has done, of course, is to legitimise intensive media scrutiny of the tax practices of all Liberal Democrat and Tory MPs and of donors to their respective parties.

His colleagues in the administration won't thank him if hiring a tax accountant is today seen as embarrassing or shameful as having extra-marital affairs was in John Major's "back to basics" government.


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  • Comment number 1.

    Simple answer, yes. We are benefit from the public services available and should pay for these.

  • Comment number 2.

    Is investing in start-ups using venture capital "immoral"? I don't think so. Perhaps Danny Alexander should state which tax avoidance measures are "immoral". Even better, cut to the chase and make them illegal. I wouldn't mind seeing the end of the private equity gutting of companies, which only makes vast fortunes for already wealthy people.

  • Comment number 3.

    It cannot be right or sustainable that the ratio of highest to lowest paid workers is one hundred and fifty to one. The Taxpayer pays enormous hidden subsidies to the owners of the means of production through working family tax credits, lower rates of business tax and tax loopholes. These allow the owners to maintain this ridiculous ratio.

    It can't be right that a few thousand individuals horde the money the millions if normal people in the country need to live.

  • Comment number 4.

    There is a clear moral (though perhaps not legal) distinction between prudent steps to minimise tax (ISA investment for example) and disgraceful avoidance, such as having one's wife become a resident of Monaco to save £300 million on a £1.2bn dividend.

  • Comment number 5.

    I'm not sure that the avoidance of tax should be treated as a moral or immoral question at all.
    Surely all efforts to simplify the tax system and the rules and to close loop holes would be a better use of everyone's time and effort. We could then get back to the simpler quesiton of whether something is legal or illegal - far less shakey ground for governments and legislators,... and bloggers and avid readers.

  • Comment number 6.

    Tax for many entrepreneurs always has and always will be something they deeply resent paying, and will do everything to avoid/reduce paying.
    It should be remembered that these people create the jobs that pay for our public services, and also that they are the most mobile people in the world who will happily up sticks to somewhere with a more attractive tax regime.
    The Coalition would do well to remember the lessons of history - when tax rates are raised, LESS tax overall is collected - when Tax rates are lowered (and when tax was simple) the overall tax take goes up.
    It is time for a radical overhaul of the tax system to make ultra simple and remove the complexities that Brown introduced that mean even highly paid experts do not understand the system. Business tax rates should be lowered to encourage more business's to relocate here.

  • Comment number 7.

    There's not a correct yes/no answer to whether tax avoidance is immoral because there's such a wide range of activities that could be considered tax avoiding. Somebody who uses an ISA to get a tax break on savings interest or a company that uses capital allowances to reduce its corporation tax on research and development activies are clearly not acting immorally; they are using tax breaks for the purpose for which they were devised.

    However, where a UK company uses a 'brass-plate' holding company in Luxembourg to sell its business units, despite never having had operations in that country, they are abusing tax law. Similarly, whilst booking all your profits to an offshore tax haven through setting up artificial loans from that company to your UK headquarters may be legal, it certainly isn't moral.

    Time and time again we see firms that have the bulk of their employees and operations in the UK somehow generate all their profits in Jersey or Bermuda, despite only having a handful of employees or even just a solicitor based there. And I think most of us would consider that to be just as morally unjustifiable as choosing to live on benefits instead of working - it's parasitic behaviour.

    Using tax breaks as they were intended is not immoral - creating highly artificial company structures and transactions solely to avoid tax clearly is, and it is time the Government cracked down on such behaviour.

  • Comment number 8.

    ... on the subject of moral acceptability, however, I should wonder why a publicly paid investigative journalist believes that is only now, after Danny Alexander attempts to hold onto his idealogical roots, that intensive media scrutiny of the tax practices of all Liberal Democrat and Tory MPs and of donors to their respective parties might be justified.
    Surely it would be immoral for someone in such a position Mr. Peston to know of underhand, immoral or even illegal practices amongst the civil servants that are our government adn their backers, but not consider it to be their responsiblity to enquire on our behalf... surely?

  • Comment number 9.

    Very interesting question.

    Illegal activity like Tax Evasion is morally indefensible..and by definition illegal. However limiting tax legitimately should be morally a requirement. Why? The laws are created to reflect the democratic wishes of the majority yet be deemed fair by the law passers, and tax becomes "dead" money that was earned by those who earned it. If they need not have it forced from them they should also have the ability to invest it for the good of all, buy things for the good of all, give it to charities for the good of some, and even stick it in the bank (for the good of the banks balance sheets and as we now know, the hard way, to us all).

    I call tax dead money despite the it paying for things (NHS, government, police etc) not because we don't want and vote for these (we typically do) but we want to equitably and reasonably do so. I'd argue that it is morally indefensible to claim that "tax avoidance is morally indefensible"!

    Jon Williams
    Disclosure - Entrepreneur and supporter of entrepreneurs through

  • Comment number 10.

    Avoiding tax on a personal level is morally wrong and yes wealthy people should pay more but I can imagine if I were on a very high salary I may balk at paying 50% of my income to the government and not have any say in how it was spent. If people pay to charities they get tax deductions - is that morally wrong? Businesses create jobs so if they reduce their tax liability but invest more in their business is that wrong? Time has shown a high tax regime leads to a lower take and if we want to encourage businesses and entrepreneurs to remain in this country and help to grow the economy then taxing them to the hilt will simply encourage them to move abroad. This country would be in an even worse state then. Thousands of jobs and the tax take that comes from that would also go. This is already happening not necessarily due to the tax take but due to lack of jobs. Many wealthy people do not really use public services as they often educate their children privately and have private healthcare. They do not get a rebate on that. I think the issue of too high salaries in the public sector is more indefensible. How can my local council leader take a salary of more than 300k with benefits? He is not creating any jobs as a private industry leader is.

  • Comment number 11.

    Is it just me, Robert, or did I miss the bit where you said "of course, what constitues 'legal' in the realm of tax (or anything else, for that matter,) is the main job of Government. So if they legislate against current practice, what was 'legal' yesterday becomes 'illegal' tomorrow."

  • Comment number 12.

    Perhaps if the government were completely accountable for the gigantic amounts of our tax completely wasted as well as didn't spend it on those who won't even work then we simply wouldn't have this problem. HMRC now want all our income to go to them first and THEN they will pay it back to us less whatever they want from it. Again, attacking those who DO generate taxes is morally wrong. The state should remember it is taxpayers who keep them and all the wasters alive.

  • Comment number 13.

    Govenor of Bank of England estimates we are spending £1 Trillion on the bank bail out. This results in interest payments of £3.2 billion per year or more than twice the money to be raised from the coalitions proposed bank tax (ignoring the reduction in business tax they benefit from). Lets start right here trying to recoup money we are owed

  • Comment number 14.

    easy answere is avoidance = evasion = defrauding the Exchequer of legitimte tax monies. for example a subcontractor builder can offset some travel costs to work as a business costs - his work clothes - tools and probably some of his mobile telephone costs as well. In addition his NI bill is also likeley to be lower. An employed office worker cannot ofset his suits, clothes, briefcase or bag, his mobile ot equipment, pns calculators,laptop etc. if they earn the same amount - I know who will pay less tax and NI and it is not the employed individual.

    I know this for a fact as I have a friend in the building trade, self employed, who earns gross approximately a 3rd more than I, pays less tax and NI, shows a lowwer net income on his accounts than I come out with, yet allways has far more disposable income than I have. I know all this because he has used me to help in in another fiels with his finances.

    Extrapalate this onto a macro scale and is soon shows those in employment and on PAYE are the mugs - ergo the current HMRC cock-up and underpaid/overpaid tax

  • Comment number 15.

    There would be less tax avoidance is the tax system was simplified substantially.

    Complexity is the problem. There are too many ifs and buts designed to appease certain lobby groups. It's time they were swept away in a massive simplification which would undoubtedly ensure that the tax distribution was more in keeping with policy.

    There is very little reason why we shouldn't now introduce a General Anti-avoidance Rule.

    If HMRC say it is inappropriate avoidance it should be so, but only if you are able to purchase a binding opinion from them before you do something.

  • Comment number 16.

    The company I work for has just decided to relocate it's head office to a tax haven to avoid the high tax liabilities in the UK. Instead of the treasury working with this and many other companies to agree a sensible tax level they have instead been driving companies abroad for many years and losing all the tax income as a consequence. Business does not recognise the moral argument that they should be expected to pay off the national debt of reckless governments who overspend and ruin their countries finances - and why should they. Would it not be fairer if we increased taxes on Labour politicians and anyone who opposes the spending cuts instead.

  • Comment number 17.

    The more the LibDems open their mouths, the more their stunning naivety becomes apparent. Does Mr Alexander not understand that, by definition, tax avoidance is not illegal, no matter how much he changes the tax laws.

    Interesting that his statement co-incides with the publication of Lord Ashcroft's damming critique of the Tory election campaign.

  • Comment number 18.

    There are reports in some of the press stating that Mr Alexander "flipped" his second home to avoid Capital Gains Tax.

    I am sure if this is proved he will pay the tax that would have been due.

  • Comment number 19.

    Why not have a straight-forward 20% tax for EVERYONE? Why not make the taxes paid locally for the area that you live in? Instead of a huge centralised pot that wastes and evenly distributes out, why not have regional centres that get paid locally and then, after the local needs are met, contribute to the centre? This would make everything accountable and meeting the needs of the regions. If a region needs more money than it can generate then there is something wrong with that region. Or does this go against the grain even for this government and the Big Society idea?

  • Comment number 20.

    the only loophole i would close is where millions of individuals have set up one man limited companies that reduce their tax bill to virtually nothing, this was unheard of in the early 90's yet over the last 15 years almost 50% of the construction industry and countless other industries is awash with people who have fiddled the system to pay less or no tax. these are not legitamate business rather cons. first rule for any limited companies should be that they have at least 2 full time employees.

  • Comment number 21.

    Simple answer NO.
    It's the job of government to pass laws; they confuse that with trying to control morals at their peril.
    You avoid tax by investing through an ISA; is that wrong? Should you not be paying tax on any interest or profit arising?
    If someone has a profit for CGT higher than the allowance (What - even in these days?) is it morally wrong to split the sale between two tax years?
    Is it morally wrong to challenge HMRC even when they're wrong? That's avoiding paying tax, even if it's not due!
    And what about couples who mitigate their tax by passing assets between each other - morally wrong?
    It's a right of people to reduce their tax bill if they have the opportunity. Of course, everyone here will say "but they're not talking about the likes of me; it's the big boys they mean." Yeah, right.
    So, one law for the rich and another for the poor. So much for everyone being treated equally, as old fashioned as "you're innocent until proven guilty".

  • Comment number 22.

    This line about tax take going down when rates are raised is a crock if rubbish. - up there with trickle down economics in the stupid things people say to justify neo liberal economic policies. There is no evidence for thus (tax takes go down in recessions when tax rates tend to go up but this isn't causal)

  • Comment number 23.

    The issue of cracking down on tax avoidance is popular party conference fodder - in a simlar way to speeches about cracking down on benefits cheats, asylum seekers etc - but the reality is that nothing much ever changes. It seems to me that there is not the political will to actually carry this through. One wonders whether politicians really want to risk upsetting major party donors. Taxes are indeed for little people.

  • Comment number 24.

    If our perception is that the govt is being free and easy with tax money then we feel justified in reducing the amount of tax we pay. So taxes paying for over the top inflation proofed pensions we can never afford ourselves and numerous other bloated and unnecessary expenditures are a sure sign that the govt. still doesn't understand the value of a penny.

  • Comment number 25.

    Gordon Brown introduced the enterprise investment scheme to reduce the tax paid on investments in certain types of business that he wished to encourage. When I invest in one of these schemes I avoid paying some tax. But, I'm doing exactly what the Chancellor was trying to encourage. All governments actively promote "tax avoidance" to achieve ends that they consider desirable. Could we please have a sensible discussion on this subject or is that asking too much?

  • Comment number 26.

    1 Have a major program of tax simplification, reduce the number of allowances, to reduce the scope for misusing them.
    2 Require companies that do audit work to do nothing else.
    3 Incentivise auditors to maximise tax revenue collected, give them a small share of it.

    If we get to the stage where the best auditors can potentially earn much more than tax advisers, I reckon our government could reduce the deficit substantially without doing anything else.

    Or, depending on your politics, you could still have the public spending cuts proposed, but then substantially reduce the tax rate.

  • Comment number 27.

    Many people i know deliberately avoid paying tax.

    Let me explain if you have a family of two and are earning £25,000, if you earn a £ more you pay 20p of it in tax 11p in NI and will lose .41p from next years tax credit award. By choosing not to work harder and earning more you are thus deliberatley avoiding paying tax. Not only that you are a net drain on the economy.

  • Comment number 28.

    If my spouse put £1.2bn in my name, I would regard it as my money to spend on myself. Serve the guy right if she spends it on toy boys.

  • Comment number 29.

    I tired of windbags (and we had plenty of those in the former administration) banging on about tax avoidance being morally reprehensible (that the majority of those same windbags tend to be found out as hypocrites is another matter).

    In these days of rolling news, just about anyone can up with a sound-bite. If tax avoidance is really a problem, then there are means at the disposal of Governments - simplify the tax regime: remove the complexities introduced in the last fifteen years, take away the favourable status for acolytes and party supporters and take an axe to some of the bureaucracy necessary to support the tax status quo.

    Danny Alexander was generally reckoned to be one of the sharpest minds in the ConLib alliance. A pity that he panders to what he thinks his audience wants to hear, if he is indeed cleverer than his quoted speech suggests.

  • Comment number 30.

    And what about the one man private-equity firm, Sir Philip Green, the owner of Top Shop, BHS and a fair chunk of the rest of the high street.

    You have to ask whether his company would be as successful if he had not worked with Labour and allowed the DWP to use the company for providing the Adviser Discetion Fund. This allows the unemployed to spend up to £300 on clothes for interview or to start work.

    I wonder if this will disappear in October's spending review?

  • Comment number 31.

    I see many (more) folk here trying to take the moral high ground. Wouldn't mind betting they have also got their hands out to be paid by the private sector (and there is of course no public sector without a private sector). Like it or not. Could try moving countries - before the money disappears !

  • Comment number 32.

    The adoption of appropriate "Tax Avoidance" legislation would be a good start!
    This would strike out (retrospectively) any arrangements whose prime or main object was to "avoid" taxation! (For both Individuals or Corporations)
    Only those arrangements which were explicitly legislated for, (eg ISA's, charitable donations, Capital expenditure reliefs etc.) would be permitted.
    I know that this would not eliminate the "avoidance" but it would help.
    I believe other Jurisdictions have had some success with this approach!

  • Comment number 33.

    From a recent court case
    "Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible,"
    "Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands.
    "Taxes are enforced exactions, not voluntary contributions," he noted. "To demand more in the name of morals is mere cant."

  • Comment number 34.

    This article is long overdue! Well done!
    Perhaps given that tax "Avoidance" is acceptable if its in the public interest in the long run.
    Perhaps everyone in the country should register their main homes as being in say, Belize and we can all avoid paying taxes so we can spend more in Topshop?
    Likewise, perhaps benefit fraud is a good thing as it stops desperately poor people from burgling houses, shoplifting and dealing drugs to make money thus saving police time and money and avoiding all those nasty cuts our public services are going to have to undergo.

    Alternatively, maybe the £100 billion + that we lose each year through tax evasion could be used to avoid making the same cuts...

  • Comment number 35.

    I look forward to the government ad campaigns targeting tax evasion.

    "Tax Evasion - were on to you! If you know a tax evader call 0800 ......."

    Somehow I suspect I'll never see it.

  • Comment number 36.

    Perhaps the first thing to abolish is the "salary sacrifice" scam, which enables firms to get out of paying tax and national insurance whilst giving pennies to the employees.

  • Comment number 37.

    The staff at HMRC are demoralised and understaffed for what they are being asked to do.

    Simplify the tax system by shifting the burden onto wealth rather than income. The overall objective would be the same to remove excess and useless money from the economy and create it where it will do most good for the real economy.

  • Comment number 38.

    Avoidance or evasion?

    A Cash-ISA is a tax avoidance scheme. Are these immoral?

  • Comment number 39.

    Is it moral for the Chancellor to demand effectively more than half someone's income? Robin Hood was famous for "stealing" from the rich to give to the poor. Is tax at 50% moral (NOT including NIC - for self-employed both employer's and employee's - and also the fact that VAT is levied on whatever one spends afterwards)? Morality does not have much to do with it - let's just stick to legal and illegal.

  • Comment number 40.

    Will the Tory Perty close tax loopholes and benefit the many or will they maximise business contributions to Tory Party funds? You always ask the tough questions. Lord Cashcrop?

    Any tax loophole closing has always been signalled well in advance, enabling those who would be hit to move their funds. Every party, every generation.

    For every shortfall from business tax collection, guess who has to fund the tax hole?

  • Comment number 41.

    Tax avoidance seems to be acceptable if you are an MP. Will Alexander now go after all the MPs who sold their tax payer funded second homes avoiding capital gains? I think not.

  • Comment number 42.

    Sir Philip spent that money on houses, cars and parties. The Government would have spent it on raising salaries for public sector workers (already paid more than their private sector counterparts)and the military. The Swiss governments approach to defense is much more sensible and significantly cheaper (and kills less innocent civilians).

  • Comment number 43.

    It seems to me that if you are a company deriving your profits from your UK operations, you should pay a fair amount of tax on those earnings. If those earnings are genuinely made in other countries, it is up to those countries to collect the tax.

    If a company is paying spurious commission or interest payments to companies based in the Cayman Islands or another tax havens, it is up to their auditors and HMRC to confirm that those payments are genuine business transactions and not purely for tax purposes.

    If a company structure or transaction exists solely for the purposes of 'legally' avoiding tax then by definition it should be classes as tax evasion!

    Likewise, why should big companies like Amazon with their huge buying power, then ride roughshod over smaller high street competitors by using their scale to base operations in tax havens like the Channel Islands to avoid paying VAT on CDs and DVDs for example.

    The problem ultimately boils down to tax law though. We currently have 1000's of pages or 'rules' which can be avoided or worked around rather than a series of 'principles' that provide a level playing field and vastly reduce the ridiculous waste of money that is spending £900m more on HMRC staff to counter the billions of fees companies and individuals pay to accountants to minimise their tax liabilities.

    The money spent on tax collection and avoidance is probably suffient to double the aid budget, reduce class sizes and do all sorts of socially useful things - instead it keeps a lot of bureaucrats and tax consultants busy.

    As Evan Davis in his 'Evan loves tax' series on tax points out, 70%+ of us would be happy to pay a bit more tax if it was seen to be simpler and fairer.

  • Comment number 44.

    A few years ago I became very disillusioned with the UK tax system, so I moved myself, and my company (a high tech company with global sales) offshore (Dubai - a place with its own money problems.)

    I make no apologies for opting out of the UK and its tax system - I'd encourage others to do the same.

    I don't mind paying tax to support those less fortunate than myself. Instead I saw it spent on
    - paying pensions to people much wealthier than me (no problem with paying to poor people, but taxing me to pay rich ones too?)
    - paying salaries housing to the royal family, who are much wealthier than me - they should be paying tax to me, not the other way around!
    - paying to bomb innocent people in various parts of the world

    I did the moral thing by opting out - nothing immoral about it at all. What is "morally unjustifiable" is a politician demanding as much money from you as he likes, and then awarding himself and his pals massive salaries, expenses and pensions ALL PAID FOR BY YOU.

  • Comment number 45.

    Why do people think that tax has to be "moral" or "ethical" or even "fair".

    These are all subjective and are very personal to individuals.

    Companies could and probably should take the view that if they pay less tax then they pay higher dividends. Is that fair? Should they be encouraged or even forced to pay the maximum amount of tax possible to the detriment of their shareholders?

    What do we think happens to tax that has been "saved"? Is it realistic to think that such money is stuffed into non disclosed offshore accounts and never enjoyed? Is it not more appropriate to think that it is spent in the UK and thus recycled?

    Retrospective changes to tax rules will drive away investors. The answer is to have a simple, easy to understand code that allows for no interpreation differences. However politicians love to tinker in tax in order to "encourage" or "promote" their favourite (perhaps vested?) interests. As long as we have party politics and vote to keep people in power who have at least one eye on staying there, we will have a confused and unfair tax system.

  • Comment number 46.

    #32 genuine retrospective legislation (ie that which states it takes effect from a date earlier than when it is passed) is extremely rare (twice in 40 years) for a couple of reasons:

    1. That is what tyrants do. Would you be willing to accept that govt could decide that you were a criminal by changing the law so that you were convicted of something that was entirely legal when you did it but is now not? Actually there is a case from the 1920s when that happened (something to do with insurance) and 20 years later the same person then got convicted for a crime which was a crime when he did it, but was not when he was tried.

    2. Long term it is counter-productive because as world wide surveys repeatedly show, investors invest far less in countries whose legal system is not stable and certain.

    In any case if you look at the tax legislation a lot of the relief already have within the law provisions that deny relief where the main purpose of the arrangements was tax.

    People can bang as much as they like but tax avoidance is, by definition legal. If you want to bring it into the realms of morals then I have a simple point - even Jesus implicitly approved of tax avoidance ("render unto Caeser...")

    The problem with tax avoidance is that the govt/HMRC definition does not match what most people would consider avoidance. There are 2 examples I always give about this, both of which HMRC consider unacceptable avoidance:

    1. For a long time, people used to take a day trip by ferry to Calais to buy booze. Sometimes they would even hire a van to do so. They were buying for their own use but basically buying 6 months or a year's upply in one go. Booze in France was much cheaper than the UK partly because of the different alcohol duty rates. Do you think of this as a tax avoidance?

    2. A number of years ago the Lab govt brought in a new tax relief to encourage small business such that the first £10,000 of dividends was tax free. Problem was that many more people set up companies to take advantage of this than HMRC/govt expected. These people had real businesses as self employed hair-dressers, builders etc. The year after the relief was granted, a junior govt minister called it a loop-hole, the year after that "unacceptable tax avoidance" yet people were using the relief in the way the law allowed for the purpose the law wanted. All that had happened was that govt did not want to admit that it had got its sums wrong.

    There is always a simple answer to tax avoidance. If people are using a tax relief in the way govt did not anticipate stop blaming the people. The tax payers do not pass legislation, parliament does. If it is not working in the way expected that is parliament's fault.

    And of course, to be deeply cynical, when is tax avoidance not immoral? When it is an MP flipping a second home in a way which minimise CGT. One rule for MPs and a different rule for us plebs

  • Comment number 47.

    Iusually agree with Robert Peston but now he has fallen into the habit of
    confusing legal with right. Because something is legal does not necessarily make it right. Where is the morlity in drawing up tax regualtions intended to ensure everybody pays their whack and allowing an industry to grwo which creates more and more imaginative ways of getting round the regulations, especially when most of those who avoid tax in this way earm more than most peopl can dream of. Something can be legal and yet be immoral.

  • Comment number 48.

    "in a simlar way to speeches about cracking down on benefits cheats, asylum seekers etc [...] not the political will to actually carry this through"

    Because the people who usually talk about this kind of thing in such terms usually don't know what they're talking about. It's okay for Rupert Murdoch to bang on about it, but the fact is he's an immigrant and you can't blanket-ban asylum claims because of these 'pesky' UN conventions.

    Same goes for bogus benefits claims - it all assumes that the numbers they talk about are actually bogus.

    Back on point, some people here have some weird views on tax policy. No reducing taxation does not magically improve the deficit - quite the opposite in fact. It can in the right circumstances but this isn't one of them.

    As for tax avoidance, if there's some types of avoidance the lib dems don't like and they don't get anywhere with the Tories like they haven't with any of the other of their policies maybe they should consider if the position in the government is tenable, do the country a favour and call for a general election so we can kick them all out.

    Oh no wait, they're too busy being charmed by the trappings of power.

  • Comment number 49.

    So where are the loopholes to avoid car tax, fuel tax, income tax etc. It seems these loopholes exist only at the top of the pile. Just another government allowance to the fat cats facillitated by lobbying (jobs on the board after leaving government)

    Crooked to the core. If these companies can't create jobs without paying taxes then surely their business model is fundamentally flawed?

    On a side note, I enjoy reading these posts, right up until Lindsay from helldom gets involved and they degenerate into slanging matches. i've been trying to keep him/her busy on the oft thread but i find her/his views too repugnant to continue. Can someone else who has the time please take over?

    Many thanks.

  • Comment number 50.

    Invent another tax for the wealthy - let's call it a wealth tax for all wealth above a £1M - did not a political party have something like this in a recent manifesto?

  • Comment number 51.

    I listened to this young man yesterday re Tax, and then I thought of all those in Parliament that "took advantage of" their very generous expenses system and how some had abused it.

    Sadly, I look at those in Parliament at present and wonder just how much Governing of this Country they have left to do? I wonder if this present coalition Government will welcome the Trans-European Transport Network (TEN-T) Policy which will give to the European Union 'sovereignty' over our Roads, Rail, Ports, Seas, Oceans and our sky. How can we afford to pay for all the EU's proposals anyway? The High Speed Rail link and the compensation for those that are to lose their Houses alone will probably break the bank. We are an Island only connected to the Continent by that one rail link, and that doesn’t always work as it should.

    We are losing our jobs, some are losing their homes, some losing long standing businesses, yet we are paying for two full Houses of Parliament that no longer can Govern this Country, for they too have to obey the same EU laws like the rest of us. If they go ahead with the EU's TEN-T Policy, will they dare look those people in the eye that so recently voted for them? Yes, because that is what they have been doing since 1972, pretending to Govern. We are broke because we are paying BILLIONS to the EU,

    The Government allegedly are not bound by what previous Government have done, they can come out of the EU then. They can learn to actually govern us. We shall see!

  • Comment number 52.

    “No man in this country is under the least obligation, moral or otherwise, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his store.”
    Lord Clyde, quote from a judgment given in 1929.
    In framing and enforcing tax rules, any other view would lead to ridiculous situations; the logical but absurd conclusion would be to declare more than is due. We all have a 'moral' view in this area, but it will not always be of practical help. It would be better to simplify tax and thus reduce loopholes. Note for instance that some taxes, eg VAT, are harder to avoid than others.

  • Comment number 53.

    This is far too simplistic

    The government, for example, enables performers to deduct a wide range of 'expenses' from their gross income. I seem to remember that hair cuts fell into the list.

    Why, frankly, should some of us get allowances to get our hair cut and not others? Its neither avoidance nor evasion but might not be acceptable. Indeed why would we enable performers at the top end to deduct the cost of stylists or PR 'gurus' or any other flunky from net personal earnings?

    This discussion needs to distinguish between

    the taxes paid by employees which are virtually impossible to fiddle
    the self employed as their allowances
    unearned income such as dividends or rental income
    capital gains
    corporation tax

    It needs to consider, from a business perspective, the contribution from business rates and employers NI. You could complain all you like about corporation tax but 11% of employees pay goes straight to the treasury, profit or no profit.

    It needs to consider where earnings are generated, rather than paid and whether or not there should be deductions for debt associated with acquisitions and to be honest, this includes mortgage interest for buy to let properties.

    It needs to consider whether a guy who works for 2 days per week for one kitchen company and three for another is actually self employed or actually employed by two companies and why IR35 or equivalent doesn't seem to apply to these chaps.

    We could consider the corner stores that keep their tills open to avoid registering transactions.

  • Comment number 54.

    I recently advised my 90 year-old, widowed, blind mother to fill in a Form R85 so that she could have her building society interest paid without deduction of tax. This is a tax avoidance measure, so does that make my mother an evil, anti-social tax-dodger on a par with Philip Green? I don't think so but where should one draw the line? There is only one rational (and enforceable) place to draw it and that is on the boundary between the legal and illegal. Anything else is hopelessly subjective.
    The Government can of course draw this line wherever they wish. After, one hopes, careful consideration by Treasury officials and detailed scrutiny by Parliament to avoid any unforeseen consequences. Chance would be a fine thing! Simplification of our tax system is desperately needed, as all those people now receiving unexpected demands from HMRC would no doubt agree.
    Finally, it is hard to see why anyone would feel morally obliged to pay more in tax than the law requires when such a large proportion of the tax we have paid over the past decade has been wilfully squandered.

  • Comment number 55.

    I agree.

    1. This issue is now on the agenda. Bit hard to see how you can justify a "all in this together" crackdown on benefit cheats without also going after the tax cheats. That is where the money is.

    2. The legal dividing line between tax cheating and tax avoidance and between benfit cheating and benefit maximisation is often hard to ascertain. In the truly boarderline cases why don't we let a jury decide on which side of the line a particular practice falls. Now that would be a truly Big Society.

  • Comment number 56.

    The issue is not morality, but legality. All you can ask is for taxpayers to act legally, if the rightous politicians and media then disagree - they must change the law.

    I have concerns on how HMRC is calculating the "Tax Gap", it covers not only the illegal but also where taxpayers make mistakes and also have difference of opinion on the law.

    Some of these differences of opinion are wholly justified, it may be because the law is badly written or never intended for how business transactions or personal investments have evolved. I find it worrying that such matters are referred to as "Tax avoidance" and are treated as a "Gap". Rather than persecuting such people, effort should be spent on better legislation, general anti-avoidance rules and advance clearance. It is not the job of HMRC to write or presume the law, this is the job of Parliament and of the Courts to interpret it.

    Also has anyone looked at the details of the Tax Gap? Most of the income tax not collected is due to people making errors on their returns - with the largest tax law in the whole world (not bad for a nation of 60M), this is hardly surprising, and BTW I didnt see any mention of the £2BN loss due to HMRC's poor IT systems.

    Finally, biggest part of the Tax Gap. Over £15BN due to VAT fraud, the black economy and carousel fraud. The biggest single item, nearly 16% of all VAT receipts, this is huge and is happening every year. So Danny Alexander and Vince Cable, perhaps you would care to focus attention on VAT fraud rather than posturing and spending £1bn to stop £1.4bn of Tax avoidanace by the rich. Pathetic,.

  • Comment number 57.

    The Government makes the tax laws and the citizens obey them and pay their taxes.
    If the Government, despite 11,000 pages of tax legislation still leaves holes in the law then they have only themselves to blame.
    Simplify the tax law and make it watertight

  • Comment number 58.

    I would make the distinction between avoidance and evasion. If they don't want us to do it then close the loophole. Or better still, simplify the tax system so that mere mortals can understand it, and take out all the complexity that Gordon Brown introduced.

    I consider that over the years I've paid plenty of tax and gotten a very poor return from it, so any opportunity to legitimately reduce what I pay is fair game. The state is a poor investment because the money going in hasn't been matched by performance coming out.

  • Comment number 59.

    If we had a simpler personal tax regime it would make tax easier, and far cheaper, to collect, thereby reducing civil service costs (and the burden on the tax payer).

    I would lke to see a single rate of 20% on our TOTAL annual income with no reductions. So if your salary was £30k pa, and you made a £10k profit on a house sale, and another £10k on share dealing then your tax liability for the year would be £10k. it would be so simple to administer that the surplus staff at HMRC could spend their time chasing down tax-avoiders - of which the vast majority are the self-employed working classes.

  • Comment number 60.

    It is my right, and indeed my duty, to pay the minimum tax that I have to. The government has no right, and should have no expectation of me paying a penny more than is due, provided I make my calculations within the law. The fact is however that the tax law is now so ludicrously complicated that the only people who fully understand it are the big accountancy companies who employ and pay handsome wages to hundreds of accountants and lawyers to go through it all with a fine tooth comb. Against them are the minimally paid HMRC employees, most of whom have nothing like the same level of qualification or expertise, and who have only a rudimentary knowledge of the law because that is all their job requires them to have. Is it any wonder that they get rings run round them.

    As an example of how complex it all is, my accountant told me that when he qualified the entire tax law was detailed in two large books. Now it fills 4 feet of shelf, and is increasing at several inches per year! Successive governments have only themselves to blame for creating the tax monster they themselves are now complaining about.

  • Comment number 61.

    Interesting question of morality. Given that I don't think anyone can seriously invoke the argument that it is one's moral duty not to obey an immoral law in the case of taxation in a democratic country, if one breaks the law it is clearly immoral. There is extensive anti-avoidance legislation covering the creation of artificial arrangements so, provided none of these regulations are offended against, one is in compliance with the law and therefore no immorality has arisen. Now, can one be in complance with the tax law and still be "immoral"? For this to be the case I think one has to create an argument that one has a moral duty to pay more tax than the law requires. I find this hard to sustain. If one wishes to make a bigger contribution then one is in the realm of charity not tax. Therefore, in a democratic country, if one complies with the tax laws then no moral obligation has been infringed against.

    A lot of noise is being generated by those arguing that it is wrong to take advantage of "loop holes" or by adopting "illegitimate tax avoidance". The law as drafted and enacted by Parliament is the law. How is any taxpayer supposed to take a "better" view of that the law is supposed to say than Parliament that enacted it? To be extreme, how is one to determine the difference; legal, moral or otherwise between taking advantage of tax relief on pension contributions, the absence of inheritance tax on estates left to one's spouse or owning assets not subject to CGT (such as cars or wine) rather than chosing to own those within its scope and undertaking any other legally valid transaction properly taxed in accordance with the law? "Illegitimate tax avoidance" does not exist. If it infringes the law it is tax evasion or fraud and hence both illegal and immoral. If it complies with the law it is exercising one's right in a free society to order one's affairs as you wish, there is no morality in paying more than the law requires in tax.

  • Comment number 62.

    There is a general view that if it's legal (or if we can get counsel's opinion that it's legal even if it's a close run thing) then it is acceptable.

    There is an industry based upon giving people tax advice which is more or less aggressive. Financial advisers, accountants and solicitors pass around clients and potential clients from one to the other and take a cut of the wealth involved in the process.

  • Comment number 63.

    If I buy a greener car in order to avoid paying taxes on petrol am I being immoral? Surely, this is tax avoidance that the government wants! What if I decide not to move house purely because I don't wish to pay stamp duty -- immoral tax avoidance? And what if I quit the country all together because of excessive tax demands from the government? Am I immoral?

    When do taxes themselves become immoral? What if the government raised income and wealth tax to such a level that it was about to seize everything I had ever worked for and everything that I ever hope to earn? Who is being immoral now?!

  • Comment number 64.

    Tax laws will only work properly when we specify _what_ the tax laws should achieve - we guarantee loopholes for greedy, sociopathic businessmen by specifying _how_ the laws should achieve it.

    Anyone who can’t show that they have paid (say) 20% tax should be charged; their assets will be stripped. And then drive them out.

    That would also solve the problems with greedy bankers in London!

  • Comment number 65.

    I wonder whether Mr Alexander’s comments were really aimed at the likes of Sir Philip Green, or at the millions of middle-Englanders who pay cash to avoid VAT, fail to inform the Revenue about benefits in kind, wrongly walk through the green channel at airports, pay themselves a pittance to avoid NI contributions, buy personal items though their companies and so on and so on? It’s not just MPs who employ members of their families & fiddle their expenses; from my own experiences most ‘self-employed’ people do the same.

  • Comment number 66.

    Tax avoidance is only possible in the very complex revenue-raising system that we have, where specialists can find the legal loopholes.
    All three main tax types (personal, corporate, sales) can be vastly simplified. This would eliminate loopholes by the simplicity of the system and save countless millions in running HMRC.
    Personally, I favour scrapping all existing tax systems and replace them with a sales tax, which is easier to collect as well as import duties on every material and non-material import (finance, labour, goods and materials). This can be done at the regional or the national level. Thus those who spend the most ("rich" people) pay the most and import duties will encourage the development of indigenous commerce and industry, utilising the natural resources of the country before overseas resources.
    Those who are concerned about import duties and reciprocal action by external markets need not be concerned provided we can supply goods and services that are better value for money than our competitors. If we can't do that, then we need to learn how to be best-in-class.

  • Comment number 67.

    I believe that this is a good question to ask, is it immoral to avoid tax, but I believe you need to go back to the start, its the tax laws that need to be looked at as these encourage people to avoid tax, an example is partners in a firm can pay there wifes a wage, even if the wife does not do any work or even goes to the business, in a partnership the directors can cliam for there children working as a wage, these are taxable expenses but is that moral to cliam for these and there are many expenses that are cliamed which are not used in the business. And we have Accountants and Lawyers encouraging people to cliam for these. When you hear that a person on benifit has cliamed too much, it makes top news, but we dont hear of a firm of Lawyers cliaming a wage for there wife, who does do no work for the firm, but doing this it reduces there tax liability. This Immoral issue is one that needs to be looked at from the top.

  • Comment number 68.

    Evryone who brings forward their major purchases to avoid the upcoming VAT rise are totally reprehensible and immoral? I dont think so!

    I don't want to pay anymore tax than I am legally obligated to pay, if that means adjusting my financial behaviour within the law then I will do it without a second thought

  • Comment number 69.

    Immoral? It's an absolute disgrace. I pay more corporation tax for my small business (2 employees) than TESCOs with their billions of profits. My Dad pays tax on his post office pension. Good luck to the Liberal Democrats and anyone who exposes these companies. Then it's up to us the public to ensure we hit them hardest where it hurts. Sadly no, I mean their wallets.

  • Comment number 70.

    It seems a simple question. Avoiding tax is not a moral question, it is obeying the law. Evasion of tax is against the law.

    I don't understand people who prefer to pay too much tax. In the same breath that you would not expect a basic tax payer to pay 30% or 40% income tax you would not expect someone to fully utilise all LEGAL allowances. Its a well established legal principal that you can arrange you tax affairs in any legal way as to avoid the over payment of tax. Not taking up these legal allowances means the Government is taking tax to which it is not entitled to. Is that fair?

    It has been shown time and time again that the lower and simpler the tax system the greater the tax take, and it is that which should be the goal, and not an exercise moralising.

    I'm sure Danny has misspoken in his basic error of calling for the end of tax avoidance, as he is calling for the end of paying the correct amount of tax.

  • Comment number 71.

    Good piece Robert.

    Danny Alexander's main point is right.

    The same principles should apply to all. And all people wanting to be part of UK should pay tax according to their means i.e. we need neither a progressive nor a regressive tax system, beyond certain low level rates to provide a safety net, and then to wean people on to paying 'the' standard rate.

    If they can snuff out all the ridiculous loopholes, then maybe that 50% rate would come back down to 40%, or maybe the whole 40% band could reduce to 35% etc.

    And as you point out, the whole system of tax-payers subsidising debt interest is completely crazy.
    Companies should pay UK corporation tax on their company profits BEFORE interest, rather than after interest is deducted, and then a large part of this farce simply won't happen at all.

  • Comment number 72.

    @63 Perhaps it is tax itself that is morally indefensible. Or perhaps the word "morally" is just marketing-speak for "this is just my opinion and cannot be objectively justified in any way whatsoever".

  • Comment number 73.

    Morals have nothing to do with the issue. If the action is legal, that is all that matters. If you think companies should be paying more, then change the law - or maybe the gov.t doesn't have the bottle to upset its friends in big business.

  • Comment number 74.

    Moral or immoral? Perhaps the value to be extolled should be 'fairness'. Is it fair to have HMRC supremo Mr. Hartnet pursuing the small taxpayer and at the same time let the corporate giant Vodafone use tax havens to avoid paying billions in tax? I don't see it myself. Something they should consider?
    Regards, etc.

  • Comment number 75.

    In my opinion it would be outrageous to ask any individual to pay £300m in tax.

  • Comment number 76.

    To every citizen according to their needs and from every citizen according to their means. (paraphrase from Henri de Saint Simon or from Louis Blanc and later by Karl Marx in 'Critique of the Gotha Programme')

    If that is what we are seeking from 'society' (big or otherwise) then the tax system should reflect this.

    There is a continuous low moan about inequality in society, but no politician is ever prepared to tackle the problem. We need both a minimum wage and a maximum wage and these end should be achieved via the tax system. Presently tax is entirely optional for the rich and totally unavoidable for the poor. We will also properly require a wealth limit for every citizen too, and not one implemented through death duties (capital transfer tax) - a lifetime limit.

    These are the proper philosophical foundations for a society. We have travelled so far from these fundamentals that we are destroying the Nation. We must re-establish these norms.

    Let me try some numbers on you all and see how you like them:

    Minimum Wage £7.50 an hour (£ 14K a year)
    Maximum Wage £75 an hour (£ 140K a year)
    Wealth Limit £1 million.

    Thoughts and reactions?

  • Comment number 77.

    Everyone in the country should pay their taxes. People like me, in employment, at the lower end of the pay scale, have our tax deducted at source. We also pay the hidden taxes on our purchases.
    Yet the fat cats who earn vast sums of money pay "consultants" to avoid paying what is rightfully due to the treasury.
    Tax avoidance should be criminalised. The government want to shave approximately £7 billion from the public sector, with a 25% reduction in the budgets of government departments. Strong, ongoing enforcement against tax cheats at the upper end of the income ladder would benefit the average worker andf possibly lessen the financial burden which will undoubtedly fall on the poorer members of our society.

  • Comment number 78.

    I suppose a lot of it depends on how you determine 'Tax Avoidance'. Essentially the immoral part of this is if tax avoidance means that you abuse the tax system to save money via tax breaks that were originally implemented for other purposes. Though it is important to keep these tax breaks in because of that purpose for which they are intended.

    The real problem lies when a rich person/business can afford to pay a team of accountants to fiddle the numbers for as many savings as possible, making them richer despite paying for the accountants - this I see as disgraceful action.

    The government need to assess the whole tax system and either completely re write it to be simple and robust. Or they need to work very hard ensuring that all loop holes are closed and that abuses of the system are not possible. They should probably employ a team of these tax avoiding accountants to assist in this.

    Regardless, it's nice to see someone in government finally making a stand about this situation.

  • Comment number 79.

    His words suggest it is immoral for one to use a cash ISA to mitigate tax on savings income.

  • Comment number 80.

    To some extent minimising your tax bill is just optimising your budget, which is what the government itself is trying to do. If people and businesses use dummy companies in tax havens, then isn't it the fault of the government for not making it illegal? Or maybe UKgov actually makes a profit out of some of those tax havens?

    I cannot see any way the government can claim the moral high ground. At a personal level, politicians have proven themselves to be hypocrites. At a governmental level, was the war in Iraq a moral use of our tax payments. I'm inclined to feel that it was a moral justification for tax avoidance. If you read Mark Easton's UK Blog, you'll see that the war on drugs is as rational as the war on Iraq - and all done with our taxes! If NI contributions and road fund are not used by UKgov as personal insurance and road budget, what do they expect of the public? I'll not go into saving useless bankers.

    And exactly who is going to be hit? The super rich and the super large companies have some big levers to swing and maintain (or improve) their tax situation. A poor guy on unemployment benefit, doing some cut price gardening, has none. Neither does a struggling one person business where the spouse is treated as an employee.

  • Comment number 81.

    76 John_from_Hendon
    'Thoughts & reactions'

    Crikey - mental springs to mind

  • Comment number 82.

    Part of the problem is that some of the super-rich believe that they actually "earn" this wealth. In fact, at best, they enable others to create it by having a good new idea or whatever. At worst, by financial and/or market manipulation, the merely put themselves in a position to take the cream off the top of what others create.

    The people upon whom we all ultimately depend are farmers. (I mean the ones who actually do the work.) There would be no "wealth creation" without them. Strange that they are nowhere near the top of our society?

    Here's an interesting analysis of the Govt's overall economic strategy.

  • Comment number 83.

    ... further to John.
    I just cannot see the Kibbutz working in modern Britain, or anywhere. There is nothing wrong in principle with people achieving wealth, or success, or having more than anyone else, assuming that this wealth has been achieved through honest means (just as subjective and problematic as immoral, I am aware).
    Flattening the playing field will jsut kill the game. It won't result in utopia, it will lead to disenfranchisement, starvation and the result will be the chaos, anarchy and survival of the fittest as always. The result will once more be haves and have nots, but no rules in which to frame the debate

  • Comment number 84.

    Our tax law is so ridiculously complicated that it is full of loopholes that those with good accountants will always be able to exploit. Provided they are staying within the law, then they are doing nothing legally wrong. Whether they are doing something morally wrong is debatable.

    There is a simple answer to this.

    Simply rip up the entire tax law, and rewrite it using a maximum of 5 sides of A4. That way, there would be no loopholes, and everyone would pay their fair share.


  • Comment number 85.

    Polly Toynbee recently wrote a comment in The Guardian comparing the fiscal effectiveness of tax collectors compared to civil servants collecting benefit fraud. I must be turning Tory because I couldn't help drawing the conclusion that the answer is to privatise tax investigators and to pay them by results, i.e bonuses. Let hound eat hound.

  • Comment number 86.

    Avoidance is not illegal. It is quite legitimate to manage your tax affairs. Mr Alexander certainly did with his second home. He did not have to pay CGT as the London home was designated his main residence. This is managing tax affairs - and good luck to him.
    But if he wants to say that tax affairs under "avoidance" should now be designated "illegal" or "unfair" then he is asking us to set a moral stance - and he should be the first to lead - so, on this basis, come on Danny - pay up!

  • Comment number 87.

    Rather than us all commenting freely about "loopholes" could anyone actually list some of these loopholes?

    Please no comments about Philip Green because it is not a loophole. He works in UK and pays tax on his earnings, his wife owns the company and lives abroad (and virtually never comes to UK). That is not a loophole unless you believe that wives should not be entitled to any independent income and all their income, assets, wealth should be taxed as if it were the husband's. That used to be the rule but as a country we have moved beyond that historic view of a wife's role. Of course, if you disagree, maybe you should check with your wife first!

  • Comment number 88.

    Frankly the way to stamp out all the issues of avoidance (legal) and evasion (illegal) is to fix tax rates at simple low levels and not make it worth while to dodge it. Also, remove all the allowances so there is no "double" benefit to avoiders or evaders.
    This is all turning into a malicious campaign against anybody who wants to get on - we cant all be poor or rich. But, we can all aspire to improve our standards - and we should never forget that the govt is the most notorious spender of other people's money.

  • Comment number 89.

    @76. At 12:54pm on 20 Sep 2010, John_from_Hendon wrote:
    "Let me try some numbers on you all and see how you like them:
    Minimum Wage £7.50 an hour (£ 14K a year)
    Maximum Wage £75 an hour (£ 140K a year)
    Wealth Limit £1 million.
    Thoughts and reactions?"

    Suits me, if you can guarantee that the taxation from those earnings would pay for (a somewhat reformed) NHS, public transport (a proper one, not a half-arsed bus service twice a day), and the public services necessary for living (and life).
    Perhaps a scaling taxation band where those on minimum wage receive no additional benefits such as child care, but are not taxed nor do they pay e'ee NI. I'm towards the lower end of the scale so am unlikely to see the earnings (and savings) cap any time soon.
    The real problem I can see with your suggestion is a massive hurdle to overcome: that of human nature. Unfortunately it's too much of an "I'm alright Jack" or even "Let them eat cake" situation. Additionally, would a chief executive accept those payment terms? I very much doubt it, given that the outgoing Chief of Network Rail, a sort-of private-company-but-taxpayer-liable-off-balance-sheet arrangement, was earning a total salary comfortably into 7 figures (including bonuses, natch).

  • Comment number 90.

    6. At 10:16am on 20 Sep 2010, brownandout wrote:

    It should be remembered that these people create the jobs that pay for our public services, and also that they are the most mobile people in the world who will happily up sticks to somewhere with a more attractive tax regime.

    Oh, ok would you like moral exemption from the muder laws too?

    The Coalition would do well to remember the lessons of history - when tax rates are raised, LESS tax overall is collected - when Tax rates are lowered (and when tax was simple) the overall tax take goes up.

    Can you provide some evidence with a grown-up interpretation of the data?
    Statistics and statistics and all that. Can't fun the economy of fantasy now can we....

  • Comment number 91.

    I think the argument that tax avoidance frees up funds for entrepreneurs to create jobs is myopic and could in many cases be completely disingenuous. Entrepreneurs don't just need spare cash, they want a good workforce, healthy and well-trained, business support and advice, start-up assistance, decent and attractive towns and cities to locate in etc. None of this is likely to be provided with any consistency without adequately funded public services. This is a two way street, tax is not 'dead money', we all reap the benefit in a multitude of ways.

  • Comment number 92.

    The people seem to have spoken on this issue - simplify the system, drawing clear lines between legal and illegal applicable to all.
    A tenner says that, much with the other issues Pesto serves up for the masses, the simple effectiveness espoused by the masses will bear little resemblence to whatever mess legislators, acolytes and lobbysists end up cooking

    Time to stop paying tax. Sadly nothing much most of us can do locked into the PAYE/ electronic Banking monoply matrix, but you can stop buying things that you don't need. Make it you mission each and every day to avoid at least one needless purchase (appreciating that for many this is how they are forced to live every day - my heart genuinely does go out to those in such a predicament).

  • Comment number 93.

    One of the features of our tax regime is that it distorts behaviour towards investments which produce the highest post-tax return - is there any real doubt that we should be encouraging behaviours to invest in projects with the highest ROI or rate of pre-tax return? That is surely the way to improve overall UK growth.

  • Comment number 94.

    The essential problem is that scale. I run a small company, and it is clear what we can and cannot offset against tax - our small business accountant knows the reasonable limits.

    However once a company gets larger, the exemptions which were put in place for sensible reasons get distorted to avoid tax, rather than proportion it. And becuase the company is larger, the paperwork is bigger, and things get hidden/ confused and so on, until what was a sensible exemption for a small / honest business becomes a device to boost cash profits.

    A simpler tax system would bring some benefits, but every exception is open to exploitation. No exceptions means a proportion of honest citizens get penalised.

    Robert's idea of the State not using accountancy firms who have tax avoidance dept's may be the easiest way to implement it.

  • Comment number 95.

    Impossible to outlaw tax avoidance, possibly undesirable anyway. I have no problem with limited mitigation of liabilities- it is found in every area of business and permitting a limited ability to avoid tax perversely attracts business and increases total tax revenues...10% of something is better than 100% of nothing argument runs true here.

    However, I'm not sure I agree at all with the presumption that Mr Green will reinvest money not paid in tax. Thats the (elected) Parliament/Government's job and frankly there is no moral defence to tax avoidance...far better to simply come clean and admit it is about greed.

    To those who 'avoid' - don't embarass yourselves by pretending its for the greater good while your on your (wifes/daughters/sons etc etc) yacht, in Monaco, registered in the BVI.

    To answer the question- making money is not immoral, it is entrepreneurial. Limiting liability is intelligent, like it or not, but if you want to appear 'morally righteous', you should probably pay as much tax as possible, which conflicts with the first element of this statement. Philip is trying to have his cake and eat it and is rightly taking some flak for that. He has chosen to enter the public sphere and in so doing faces greater scrutiny of his conduct. Does avoiding tax make him immoral? It depends where it is and what he does with it. If he 'invests' or spends it here, I don't really care. If taken abroad, in an economic environment where service jobs are being lost (where Arcadia makes its money) the answer must be, yes.

    Which makes it all the more ironic that he is now advising the government.

  • Comment number 96.

    42. LFH wrote: "Sir Philip spent that money on houses, cars and parties. The Government would have spent it on raising salaries for public sector workers (already paid more than their private sector counterparts)and the military."

    I have some sympathy with this statement as governments (particulalry the Labour ones) are very adept at finding out the most ingenious ways of raising tax (i.e. auction of the 3G spectrum, GB raid on private pensions etc.) yet they are quote useless in effectively spending the proceeds - viz. the current mess we are in.

    On the other hand there are plenty of references in the press about short-termism of British investors. The reason we have skills gap, jobs are disappearing to India and country is sliding down the economic league is that continuous chase after the short-term profit and get-rich-quick attitude. A little bit more forward thinking by our leaders (both political and industrial) would be invaluable here. Will it happen out of its own accord? I doubt it. Maybe the forthcoming depression will forge the sense of solidarity and responsibility in the nation...? And the "we are all in this together" will ring true.

  • Comment number 97.

    I work in recruitment and run many contractors, we have been told that we are responsible for tax if it is avoided by the contractor. But the have no way of telling if a contractor is paying their tax (paying tax last year does not automatically mean they will pay it this year). the majority of contractors avoid paying tax, quoting things like "tax efficent accountancy" etc.. and I would guess 1 in 2 contractors do this or their umbrella companies will do it for them. It takes up at least a day of my time to credit check a new company or umbrella company to find out how they work etc and in the end I have only gut instinct to go on and decide whether I should work with them or not. I am positive that with some simple measures this can be addressed and the billions of pounds these guys avoid paying every year could easily be recouped.

  • Comment number 98.

    At 12:54pm on 20 Sep 2010, John_from_Hendon:
    Interesting idea on how to run a nation, but I think it goes against the grain of a thousand years of property law.

    I think that it basically gets to the crux of what society you wish to live in and on what principals that society is guided by.

    One of the consequences of your nation is that property then belongs to the state, and it lends it to you within certain limits. People are only allowed to have income up to certain limits which are again defined by the state. At the lower level how would you get people to do certain jobs without the spectrum of pay to differentiate.

    Take two jobs that would currently be paid below the £14k and his supervisor who has more responsibility being paid slightly more. How do you sufficiently reward the person for taking the responsibility without a step in pay?

    Also how would you motivate at the higher level? Take a GP who earns currently £149k for a 4 day week. They currently may choose not to work harder or longer on the extra day as they will be taxed at a higher rate for earning more/ This will be magnified when there is a salary cap. Many will just leave. Most doctors will have spent some time abroad over their training and working life.

    I believe in a country of personal liberty and freedoms where I lend MY money to the Government in order for them to spend it wisely on mandated projects, schemes and to provide a safety net for the sick and poor as a civilised society should. The state should not over step the mark. Taxation should not be taken for granted. When was the last time you were thanked by the government for paying over your taxes to them? It is not fair.

  • Comment number 99.

    The only way to stop tax dodgers is to simplify the tax system and clarify, once and for all, what is not acceptable.

    But we all try and avoid paying tax whether you are a poor individual or a multi million pound company. The only difference is the scale of the reward for your efforts. Take ISA's. Why do we need them at all? Surely if the tax system was simple and fair for all, we wouldn't have to put our own money into these tax vehicles.

    The huge difference between pay scales at the top and bottom also has an effect. This must be ended.

  • Comment number 100.

    @84 I absolutely agree. The impact of an overcomplex system has been the development of tax avoidance industry and a second career structure for tax inspectors.

    If tax rates were simpler with fewer offsets then tax returns would be simpler - we, as taxpayers, would produce returns which were unequivocal and would require fewer inspectors to police them. How could that be a bad thing?


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