Tuesday, 5 April 2016

An admission of tax avoidance

I was somewhat unnerved to hear the shadow chancellor saying we should crack down on those involved in tax evasion and avoidance. Lumping the two together both dilutes the fight against the criminals and threatens to stigmatise a fair percentage of the population.

As there's often confusion between the two (I certainly have to check every time I use the terms), evasion is illegal. It is engaging in deception to reduce your tax bill. Avoidance is choosing an approach within the law to reduce the amount of tax you pay.

The reality is that I - and plenty of you - have indulged in avoidance. A simple example is choosing to put your savings into an ISA rather than an account where you pay tax on the interest.

Of course some avoidance - such as the complex structures used by the likes of Google and Amazon - should be prevented from happening. But in the end that's a matter of sorting out the tax regime. If HMRC simplified our incredibly complex tax structure, it could slash heavy duty unnecessary avoidance at a stroke. Unfortunately the bureaucratic mind seems inclined to make things more complex instead, leaving more potential loopholes, but we shall see.

When politicians lump avoidance and evasion together, they smooth over the reality that evasion is the fault of the criminals perpetrating it. But avoidance is the fault of badly written, overly complex tax codes - and the fault for that lies squarely with the government and the civil service. Don't let them get away with blaming this on everyone else.


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