Avoiding Tax Avoidance

Tax is a taxing subject and designing fair taxes is problematical. There is plenty of tax avoidance around, but what is tax avoidance? A person who gives a sum of money to his or her child will hope to avoid Inheritance tax, if they survive seven years. Opening an ISA account avoids some income tax. Donating to a charity avoids some income tax in many circumstances. Tax avoidance is simply arranging your affairs to minimise tax liability within the law. Some claim that a taxpayer should act within the spirit of the law, but I find it hard to understand the spirit of the law as a general principle. What seems to me to be obvious is that tax should be fair.

Ordinary people have little chance of lawfully avoiding tax, and any tax they may avoid does not really amount to more than the proverbial hill of beans. The big tax avoiders are the multinational corporations.

They use some ways of avoiding tax that sound morally questionable. For example, large companies often arrange their affairs so as to pay small amounts of tax in a low tax jurisdiction, like Luxembourg, (that stalwart of the European Union)even though they earn large amounts of revenue in many high tax jurisdictions. Digital companies, like Apple, Facebook and Google have great expertise in doing this. Trading companies like Amazon and Starbucks also have expertise. For example, Google will pay £49.3 million in Corporation Tax to the UK government this year on a profit of £200 million, even though the value of its UK sales was nearly £6 billion. Many regard this state of affairs as unfair, and if taxes are to be imposed all taxpayers must feel that the tax system is fair.

In the UK Amazon records profits of just £34.4 million and paid £11.9 million in tax. It seems that Amazon does not pay all of its UK staff a living wage. Many of these staff will have their income from Amazon supplement by benefits collected from taxes paid by UK taxpayers, who in effect are subsiding Amazon through the benefits system. That does not sound fair.

The solution is to avoid the tax avoidance on these large multinational companies by imposing a digital tax and a turnover tax. If the value of Google’s UK presence only shows a profit of £200 million then there must be something wrong in the way that profit is defined for tax purposes, and if the definition of profit cannot be redefined without causing all kinds of adverse consequences then it is the duty of the government to look for other ways of collecting revenue, and the most obvious way is by imposing a turnover tax and a digital tax. If the government cannot end tax avoidance it should impose different taxes which avoid tax avoidance.

Honesty and Integrity

When I applied for admission to the roll of solicitors in 1974 it was a requirement that applicants be interviewed by a panel of the Law Society. At my interview I was asked what the two most important qualities were of a solicitor. I replied that I thought honesty and integrity were the most important qualities. The panel asked me what was the difference between honesty and integrity. Continue reading

The Death of Rock and Roll

I was talking recently to a rock musician about the Gibson guitar company which has now fallen on hard times. He said that rock music was no longer fashionable, just as the big bands before and shortly after the Second World War became unfashionable. I wondered, then, whether we are now seeing the death of rock and roll. Continue reading

The Crime of Assisting in Evasion of Foreign Tax

Hundreds of volumes of our laws are written to ensure that the government may successfully collect taxes. A large amount of people are employed in collecting those taxes. Whole industries have been created about the collection of taxes and about the avoidance of taxes.

Under new laws that came into force on 30 September 2017 two new criminal offences have been created, dealing respectively with facilitating the evasion of UK tax or the evasion of foreign tax. These offences can be committed by those working in these tax industries. Continue reading

Worker. Employee or Independent Contractor?

The Supreme Court is hearing argument in the case brought by Mr Smith against Pimlico Plumbers. The case will provide (I hope) some clear rules on an area of uncertainty: when is someone an employees, when are they a worker and when are they an independent contractor? The three possible statuses are a result of modern trends, in which businesses try to hire folk at the least cost. An independent contractor is the least favourable option for the person being hired. If that is the status then the person being hired is only entitled to the benefits under the contract. The next least favourable option is that of a “worker”. “Workers” are entitled to holiday pay and certain other rights but not the full gamut of rights that an employee enjoys. Continue reading

Problem Solving

Many people like puzzles. They become expert in crosswords or sudoku or similar recreations, which can be a pleasant way to spend time, but real life legal puzzles are not an entertainment; for those clients caught in the midst of a legal puzzle they endure great stress. Most people who find themselves being sued or having to sue never, when they started on a course of business or a relationship, envisaged that it would end in tears. They suddenly, and these things often happen suddenly, discover that their life’s work is at risk, and the stress of many thousands of hours being wasted. Continue reading

Making Too Many laws

In ancient times people started with custom, a way of doing things, which morphed into law. As people developed, so law developed. In some places custom became precedent, and frequently whole bodies of precedent were turned into codified laws. Continue reading