Wednesday, 21 March 2012

The tax morality dilemma

It's all about the money (money, money)
It's budget day in the UK and there is much headscratching about taxation and its avoidance. There was a fascinating discussion about the morality of tax avoidance on yesterday's Channel 4 News between representatives of a conservative think tank and UK Uncut which calls itself 'a grassroots movement taking action to highlight alternatives to the government's spending cuts'.

Tax avoidance is one of those things that it's so easy to have a knee-jerk reaction to - 'We need to clamp down on it!' - but when you start looking at it in detail, it's not all black and white. Tax avoidance is about keeping your personal tax burden to a minimum - realistically, who wants to pay more tax than they legally have to?

At its most morally friendly, tax avoidance is putting your savings in a tax-free ISA. That way you avoid paying the tax on the interest you would otherwise pay. Few would argue this is a problem. Then there's the middle ground. So, for instance, anyone who owns their own company will have some leeway on deciding whether the individual or the company pays tax on various items. For example, the individual could buy a computer and pay the tax on it, or the company could buy it and not pay the tax. If it's for business use, most people would argue it's morally okay to avoid the tax - yet you will hear moans about 'sharp practices.'

Then there are the still (currently) legal, but dodgy feeling things, like setting up a trust to buy your house so you don't have to pay normal levels of stamp duty. That's where things get a little unsure. Finally there's the out-and-out illegal cases that are tax evasion. So, for instance, if you take payment in cash and miss out the VAT.

What was so fascinating about that interview is that the UK Uncut guy was arguing that the absolute morally worst example (taking cash and not declaring it) was okay, because this was just a small person making ends meet, not a rich fat cat or company raking in the profits. That is such hypocrisy. If you decide to bring morality into a taxation issue, then the last thing you can do is let through an example that breaks the law, just because it's not the person you want to hurt. Morals aren't like that. If it's wrong, it's wrong. Make your mind up guys. Do you want tax to be about morals or not?

1 comment:

  1. >>the UK Uncut guy ...

    What a prat!

    I think Greece is possibly in more trouble than it needs to be through this 'cash in hand' practice; apparently tax evasion is really part of Greek culture.

    I should admit to being guilty of avoiding tax where possible in the past: I remember once owning - for 24 hours - some Platinum Sponge. I never saw it - it was sat on a dock somewhere in the far east - I presume my agent sold it to someone else doing the same thing - it's possible still there! That was all done through a tax accountant, and it saved paying rather a lot of tax. I've no idea how/why, but to be honest, I wasn't really interested - just so long as it was legal! The government closed that loophole and I think after that we did it via buying Gold somewhere, then wine, then art, and so it continued. I wonder what the currency is at the moment!