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.

A Trick a Deception and a Fiction – Tax Avoidance

The politicians have called it “the Google Tax” ; they now intend to tax multinationals that operate in the United Kingdom who at present manage to avoid paying UK taxes by using interesting means. This Google tax is long overdue. I am not a lover of multinationals; they seem to scare governments and cower them. However, the most interesting thing about this issue is not that the multinationals avoid tax – every sane person and business would seek to keep its tax bill to the minimum – but the means by which they avoid paying tax,  Continue reading

Bank Accounts and Tax

Anyone who has tried in recent years to open a bank account has found that it takes about a month; ten years ago you could open a bank account in a week. Twenty years ago the process took half an hour. Today in the developed nations people need bank accounts far more than they did twenty years ago. The vast majority of payments are not made in cash but by bank transfer or credit card transactions. The reasons for this simple operation taking so long is modern days is given as the need to prevent money laundering. The reason given is not the whole truth. Continue reading

We Are All Tax Avoiders

There is a great deal of  hypocrisy exhibited by folk when they talk about tax avoidance.  In truth we are all tax avoiders, Continue reading

The Compensation of Sin is…

I heard Sam Laidlaw, Chief Executive of Centrica who own British Gas, speak on the radio about energy prices on the BBC’s “today” programme on Radio 4. He spoke well, as you would expect from someone who runs a very large company; the arts of propaganda have developed since the days of the late unlamented Dr Goebbels. I was not too interested in what Mr Laidlaw had to say until he answered the last question, which was whether Mr Laidlaw was paid too much. Continue reading

Democracy and Freedom and Global Corporations

As societies become wealthier and more sophisticated and have to concentrate less on preventing starvation and basic survival, so they become more interested in democracy and freedom. This is a generalisation and like all generalisations there are important exceptions; in some oppressed poor societies people may feel that they have nothing to lose but to try to agitate for freedom in the hope that freedom and democracy will provide less starvation and more wealth, but it is hard to fight for freedom on an empty stomach and harder to fight for freedom on a stomach that is extended with too much food. Continue reading

A Tale of Taxes – Laughing all the Way to the Tax Haven

Jimmy Carr is a successful comedian. He makes people laugh. His success enables him to earn a great deal of money, and people who earn a great deal of money are supposed to pay tax on what they earn as are people that earn modest amounts of money. In order to postpone or reduce the tax he paid Mr Carr entered into a tax scheme or device, under which he transferred his right to receive his salary to an offshore entity. However, Mr Carr still wanted to receive his salary and so as part of the deal, it seems, he borrowed money back from the entity. There would be no tax to pay on the loan, so he was in effect avoiding tax on a large income while still being able to spend it. Continue reading