I see that David Cameron has jumped onto the anti tax avoidance bandwagon, now seemingly rather popular with our political "elite".
Cameron was at a "PM Direct" event with small business this morning. The Huffington Post quotes him as saying that the government needs a "tougher approach" to tax avoidance (tax avoidance is legal, tax evasion is illegal).
He stated that HMRC needed to make sure big companies paid "their fair share".
Adding:
"I think we need a tougher approach and one of the things we’re going to be looking at this year is whether there’s going to be a more general anti-avoidance power that HMRC can use, particularly on very wealthy individuals."
Cameron added that HMRC should think about being "business friendly to small business".
A few points:
1 Tax avoidance is legal, and has been part of the system since day one.
Why now are our political "elite" suddenly so vexed about it, especially as so many of them are on the boards of the companies that seek to minimise their tax payments via legitimate tax arrangements?
The "elite" have been part and parcel of tax avoidance schemes employed by large companies since day one.
2 What exactly does Cameron mean by "fair share"? Either you are paying the taxes as prescribed by the law or you are not.
3 Taxes, and HMRC, all come under the control of our elected representatives; it is time that they accepted their responsibility for the mess that our tax system is in.
4 "Business friendly to small business" starts with cutting government red tape and simplifying the tax system. When exactly does the government intend to start doing this?
Tax does have to be taxing.
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This makes me so mad. The real problem is that the tax system is so complex. I note that the IFS agrees. I have blogged on this at http://graspthemettle.blogspot.com/
ReplyDeleteI think by "their fair share" he means "more tax".
ReplyDeleteYou needn't worry about Cameron, Ken. He shares your neoliberal enthusiasm for regressive redistribution of wealth to those who need it least and clearly doesn't really wish to do anything about the fact that so many large companies and wealthy individuals indeed don't pay their "fair share". At the same time, of course, he has to make the right sort of noises to make voters think he does.
ReplyDeleteYour numbering:
1) "The "elite" have been part and parcel of tax avoidance schemes employed by large companies since day one."
Absolutely! All the more reason they need to be lobbied hard - as certain groups are - to actually do something about it rather than paying lip-service like Cameron is!
2) "Either you are paying the taxes as prescribed by the law or you are not."
The circularity of this part of your argument absolutely astonishes me. You seem to imply that, just because something is currently legal (and for the moment we'll leave aside the frequent cases where it is a very, very uncertain whether or not an avoidance scheme is legal!) it should always remain legal.
3) Agreed. However, you seem to oppose any ideas to improve the situation without ever suggesting a developed alternative proposal (and vague noises about simplifying the tax code or flat tax rates don't even come close).
4) Having done your reading, you'll of course know that simplifying the tax system is one of the stated aims of the General Anti-Avoidance Rule ("GAAR") to which Cameron refers. Publically, the idea is that the GAAR is brought in as a magic wand and future ordinary tax legislation can be enacted without new Targeted Anti-Avoidance Rules (TAARs); current TAARs can even be repealed. Unfortunately, the GAAR will inevitably be less effective than planned, and the removal of TAARs will lead to a "Happy Time" (oh oh! Nazi reference alert!) for the avoidance industry.
(I'll leave for another comment my firm belief that, for the vast majority of individuals and small businesses, the tax system has not been getting more complex in recent years.)
Make no mistake. The Tories are on your side, Ken. This GAAR is a sop to UK Uncut and their ilk which will in fact have the effect of allowing those with the means to employ the most expensive advisers to pay even less tax.
Stew G
PS - First comment of '12. Happy New Year, Ken!
David Cameron has the ability to stop tax avoidance.....by closing loopholes and ensuring everyone pays their fair share.
ReplyDeleteTo start with no Director should be allowed to take a substantial salary in dividends, paying 10% on amounts under £35000 alongside a salary equivalent to the personal allowance.
Basic rate is good enough for the rest of us.
CLOSE THIS LOOPHOLE NOW
Accountant likes avoidance shock.
ReplyDeleteNext week, turkeys protest about Christmas, Eskimoes express distinct liking for snow.
David Cameron and his rich buddies could say we know their is tax avoidance schemes out there we could use our Accountants have advised us to use them but we will not for the good of the country.
Deletel am sure David Cameron will do this after saying recently that the Conservative Party was not the party of the rich, action speaks louder than words David Cameron lets see some action from you adopt this right away
As paulsc said, the tax system is unecessarily complex and probably avoidance and evasion could be reduced if it was greatly simplified.
ReplyDeleteThe time it takes to fill in a CT600 has risen at least ten fold in under 5 years now they no longer accept pdf accounts & calculations and introduced that stupid flaky pdf-based submission system.
@Stew G
ReplyDeleteWelcome back! You are the voice of calm amongst those who have extremely warm keyboards.
@xoggoth
5 years ago you say?
Let me tell you a story.
Once upon a time, Inland Revenue used to have tiny little bunnies called 'Revenue Assistants'. They were employed at a starting salary that hovered somewhere just above minimum wage. They would log the basic details from your CT600 form on to a quaint system called COTAX (which still exists by the way).
Then along came big the scary Brown Chancellor. Who announced that Inland Revenue and Customs and Excise must merge. The merge was presented to the public as a way of getting rid of duplication within the tax system and therefore an excuse to get rid of thousands of admin grades.
So, the admin grades involved in any kind 'processing' (the people who deal with your tax on a day-to-day basis rather than those who investigate you) were slowly lost through various early termination incentives, "paid off" if you wish. With them went their knowledge and expertise, as none of the early leavers were encouraged to share their knowledge and expertise before they left.
Somewhere in this time line. HMRC must have been 'sold' the idea that iXBRL would allow them to lose even more jobs by making accounts be presented in a structured format and therefore less analysis involved.
Meanwhile, those lefty socialists (remember socialists argue that workers take control the means of production) at PCS who were arguing that computerisation would lead to job losses. The were sniggered at for being umm... lefty socialists. Meanwhile the means of production was left in control of the provider and 'encouraged' online filers to 'conform'.
Advance forward to 2011 where CT/ VAT/National Insurance/CIS/SA/PAYE systems and business units still don't talk to each other adequately but if you ask HMRC to invest in making the system better. They state that the private IT suppliers have them over a barrel by charging millions per IT release.
"Meanwhile, those lefty socialists (remember socialists argue that workers take control the means of production) at PCS who were arguing that computerisation would lead to job losses. The were sniggered at for being umm... lefty socialists. Meanwhile the means of production was left in control of the provider and 'encouraged' online filers to 'conform'."
ReplyDeleteYou seem to be implying that a massive state organ (beloved of so many socialists) is so unfit for purpose, despite its enormous thirst for our money to run itself, that this is in some way an argument for "lefty socialism". Nice try. We won't get fooled again.
@6 January 2012 20:59
ReplyDelete"You seem to be implying that a massive state organ (beloved of so many socialists) is so unfit for purpose, despite its enormous thirst for our money to run itself, that this is in some way an argument for "lefty socialism". Nice try. We won't get fooled again."
No, it's much better that the state gives 10x more to private companies through taxpayers to 'run itself' isn't it?
The only bloating around here is the engorging of your tax money by private sector contracts that were advertised as replacements for the public sector. Won't be fooled again? That implies you have stopped continuing to be fooled in the first place by the current system.
@6 January 2012 20:59
ReplyDeleteAnd look what happens when you outsource everthing? See http://www.blogger.com/comment.g?blogID=29600742611858461&postID=695451978727111990
I suspect sooner or later someone will bleat that an HMRC staffer took this off topic, however it was 'conceived' by a comment from xoggoth which had nothing to do with how complex the tax system is but about the outsourced computer system. Why no comments about how complex the tax system is? Probably because people inside and outside HMRC are in agreement! However, as Stew G has pointed out. Accountants have a few ill conceived ideas about how to make their lives easier and still get away with charging top-dollar.
ReplyDeleteYou remember those headlines in 2007-08 "Bloated Socialism brought down the collapse of free-market economies" don't you?
ReplyDeleteYou don't?! Really?! How odd.
@ 6 January 2012 21:37
ReplyDeleteThe tax affairs of the vast majority of UK citizens is relatively straight forward,
now... if you are wealthy or a large corporation that's another matter. Especially when tax lawyers & accountants are involved
@7 January 2012 17:49
ReplyDeleteI half agree with you. Most peoples tax affairs are relatively simple.
Most people don't know their own tax affairs are relatively simple or that they can ask HMRC for advice when their income changes (and they give the right information) then it becomes not simple.
I know there will be people on this site that disagree, but most of them will be of the ilk that gave HMRC duff/no information in the first place then whined when things went wrong.
I guess for those people RTI (a conservative government proposal) will be a good thing e.g. HMRC will know exactly when you have a wage increase/decrease and tax you correctly at the point of payment and making you even more reliant on the state to do things for you, however won't that also mean big brother is watching you?
I agree with 21:54 in that most people's tax affairs are simple and straight forward.
ReplyDeleteAlthough I also agree with the point regarding things getting complicated if the tax payer gives duff info. Unfortunately things can also get complicated if the tax payer gives the correct information but HMRC fail to process it in a timely manner or correctly. I am not in a position to say which is the greater problem.
@ 7 January 2012 21:54
ReplyDeleteRTI will be a train wreck!!!
@8 January 2012 10:45
ReplyDeleteRTI will be a great gift to you - if the information from you or your employer is top quality data. In other words. RTI will completely bypass HMRC staff and be fully automated.
So if the data quality of the information provided by you or your employer is not of the high standard the RTI system expects from you, you will be severely shafted.
In other words, pensioners who expect to communicate with a human being will have to work out online why their tax code has gone wrong by being able to work out the background of why software variables have messed up their PAYE. As there won't be any HMRC staff left.
They won't be able to ask their pension providers payroll, because their software is already automated and rely on their interpretation of software data variables working with HMRC.
Yep. Sack more HMRC staff and leave it all to automation. That has worked over the past 5 years hasn't it? Isn't that how Nick Leeson managed to crash the Nikkei index? Relying on computers to do the work for him?