Tax Avoidance

[DaBeeeenster]

http://www.guardian.co.uk/comment/st...314126,00.html

Tax avoidance in the United Kingdom deprives the exchequer of between £25bn and £85bn a year, according to the Tax Justice Network. It's hard to get your head round these figures, until you see that the low figure more or less equates to the projected public-sector deficit for this financial year. The high figure represents 74% of the income tax the exchequer receives. It is more than we spend on the national health service. The super-rich are fleecing us.

Thoughts?

[RVF500]

Tax avoidance is legal. Why pay taxes if you don't have to?

Another question is, how much in unclaimed tax refunds are left in the exchequer each year (I don't know the figure but I understand it to be high) You don't see the exchequer bending over backwards to give the money back. Took me three years to get back £4000 they owed me in employees NI. After they had already refunded me for the employers NI contributions I had overpaid for the same period. Guess who got the interest on that money. Not me. So I for one won't be rushing to pay taxes I don't need to.

You don't have to be rich to avoid tax. Anyone can and does do it if they know how to.

[DaBeeeenster]

If you work in McDonalds, and have your tax removed from your pay packet that you pick up every week (or indeed if you work for a large company that processes your payroll for you, which is almost all of them), how can you avoid paying tax?

[nichomach]

It is up to the government and the Inland Revenue (where such authority is delegated to them) to frame such laws as are required to allow them to collect the taxes that they feel to be necessary. If someone entirely legally works out how to arrange their finances to pay less tax, then they've done nothing wrong. Monbiot in this regard is, I'm afraid, an ass; there is all the moral difference in the world between tax evasion and avoidance. One is fraud, the other is not. Labelling the people who make sure that they legally pay the minimum tax that they can as "tax cheats" is bordering on libellous; they're not cheating, they're simply making sure that they understand the rules and apply them to the letter in as favourable a way to themselves as they can. If one wishes to argue that the current system has too many loopholes, and that this results in inequity where the poor pay more than they should and the rich get to pay far less than they should, then that is certainly a valid argument and one with which I would not disagree, but there's no "fleecing" going on, just careful accountancy. That, I'm afraid is not a crime. Monbiot complains about the rhetoric used to demonise welfare cheats, and well he should, but the remedy is not to likewise demonise people who are (unlike benefit fraudsters) not doing anything criminal. By all means, campaign for reform, I'll support it. Point out the loopholes that benefit people like the Barclays and I'll applaud. But using the same tabloid rhetoric that we despise when applied to others isn't an answer.

[nichomach]

If you work in McDonalds, and have your tax removed from your pay packet that you pick up every week (or indeed if you work for a large company that processes your payroll for you, which is almost all of them), how can you avoid paying tax?

One can invest one's savings in tax-exempt savings schemes and the like, which is on a small scale analogous to what the people Monbiot is complaining about do; that's tax avoidance. If on the other hand one does work "for cash" and one does not declare one's earnings, then that's tax evasion.

[Flibb]

One of the most common ways of avoiding paying a bit of tax is to take out tax free savings in childrens or other adults names (up to their limit).

[G4Z]

I also heard from one of my mates with an economics degree that the most commonly used loophole is charity contribution, you can donate so much to charity that it makes you tax exempt and it is cheaper than paying the tax itself.

[malfunction]

I have absolutely nothing against tax avoidance - I understand the moral implications but if given the LEGAL choice between losing 23% of my wages to the government or keeping it to myself I know EXACTLY what I would do - keep it - and I reckon anyone saying otherwise is a bloody hypocrite. On a the other hand I do not have any problem paying national insurance - though the funds are likely mis-managed and the NHS and state pension may not be in the best of health (no pun intended) I do not resent paying national insurance as I believe that both the NHS and the state pension are bloody important - I'm sure better use could be made of the money but the very idea of them is something I think is worthwhile. As for my income tax though - not to mention the probable huge amount of tax I pay in VAT and duty - where the hell does that go? And what (real) say do I have on what it's spent on?

[Rave]

The solution, ultimately, is to close all the loopholes that allow people and companies to avoid paying tax. The government should just make the law simple enough that it becomes 'if you don't pay tax here, you don't work or do business here'.

Since the Inland Revenue recently sold all its buildings to a company in a tax haven on a 'lease-back' scheme, I don't think the government takes the problem all that seriously.

Rich :¬)

[malfunction]

Indeed ^^^

It's "do as I say not do as I do" when it comes down to it. Anyone that knows there is an alternative - and can afford to investigate that alternative - will pay as little as they legally have to... And you can't blame them for that - if the law isn't fair it needs to be changed... But that won't happen as it would I'm sure adversely effect those in charge of these matters anyway.

Also - the issue with the McEmployee not having access to advice / an alternative to PAYE is valid but isn't the real issue the fact that, being paid so little, they ought to have (more) tax relief and / or support from the state in the first place? Or - and this is the popular view and not something I 100% agree with - try and get something better? (Though I have to admit that someone somewhere will have to fill the low paid jobs so that's not really an answer in itself - I'm not naive enough to suggest that McDonalds would suddenly double everyone's pay because they're finding it hard to recruit people).

[RVF500]

After leaving the army. An organisation where you would think that your tax would be taken at source with no room for manouvre. I went to work for myself. So I hired an accountant. The first thing he did was get me to fill out a tax form. The net result of this little excercise (obviously he did more than just stick it in an envelope) was to reclaim over £600 in overpaid tax on my behalf. How? well he knew what to claim for and I wouldn't mind betting that the McEmployee (maxed or otherwise) could claim some of their tax back. Now, before I get jumped on by people screaming ,fat cat, and moaning that people can't afford accountants. If you are serious about sorting your tax out then you can do the research yourself. It's not an official secret. Speak to people such as citizens advice. Speak to the tax office, they will actually tell you the truth about things if you ask. As well as tell you where to look.

Or you can sit on your ar*e and moan about paying too much tax and carry on oversubscribing to your hearts content. Choice, ain't democracy wonderful.

[DaBeeeenster]

One can invest one's savings in tax-exempt savings schemes and the like, which is on a small scale analogous to what the people Monbiot is complaining about do; that's tax avoidance. If on the other hand one does work "for cash" and one does not declare one's earnings, then that's tax evasion.

That's not what he is talking about, I'm pretty certain. The government WANT people to save money, which is why they encourage tax free savings plans like ISA's.

Putting money into an ISA, which is promoted by the government, and opening a number of off-shore accounts in order to avoid income tax payments are VERY different things.

[DaBeeeenster]

It is up to the government and the Inland Revenue (where such authority is delegated to them) to frame such laws as are required to allow them to collect the taxes that they feel to be necessary. If someone entirely legally works out how to arrange their finances to pay less tax, then they've done nothing wrong. Monbiot in this regard is, I'm afraid, an ass; there is all the moral difference in the world between tax evasion and avoidance. One is fraud, the other is not. Labelling the people who make sure that they legally pay the minimum tax that they can as "tax cheats" is bordering on libellous; they're not cheating, they're simply making sure that they understand the rules and apply them to the letter in as favourable a way to themselves as they can. If one wishes to argue that the current system has too many loopholes, and that this results in inequity where the poor pay more than they should and the rich get to pay far less than they should, then that is certainly a valid argument and one with which I would not disagree, but there's no "fleecing" going on, just careful accountancy. That, I'm afraid is not a crime. Monbiot complains about the rhetoric used to demonise welfare cheats, and well he should, but the remedy is not to likewise demonise people who are (unlike benefit fraudsters) not doing anything criminal. By all means, campaign for reform, I'll support it. Point out the loopholes that benefit people like the Barclays and I'll applaud. But using the same tabloid rhetoric that we despise when applied to others isn't an answer.

I'm not sure I understand your point.

"there is all the moral difference in the world between tax evasion and avoidance"

Could you provide firm definitions of both of these?

Is opening an off-shore business account, and paying almost zero income tax "evasion" or "avoidance"?
Is employing your wife and paying her £4.5k a year (tax free) salary evasion or avoidance?
Is having a head office in the Cayman islands, thus avoiding corporation tax, even tho you do no business there, evasion or avoidance?

[RVF500]

The solution, ultimately, is to close all the loopholes that allow people and companies to avoid paying tax. The government should just make the law simple enough that it becomes 'if you don't pay tax here, you don't work or do business here'.

Something like this happened with IR35 and that's exactly what thousands of highly skilled engineers did. We had a mini 'brain drain' I was out of the country myself for over 4 years.

Anyway, the Revenue task force for IR35 set up a meeting with the PCG (Professional Contractors Group) to resolve the issue. PCG said scrap IR35 and the contractors will return. Lets face it they were paying large sums in tax before this without quibble. The govt rep agreed. Dawn Primarolo's famous response was 'they earn too much anyway' and it stayed. They engineers also stayed away. So what happened? The govt removed bars on overseas contractors to come in and do the work. They took their cash home and the UK contractors kept their cash offshore. How many millions do you think govt lost over that little exercise? Shall we mention at this point that prior to IR35 the accountants association warned the revenue that they would make a net loss if they pushed the policy through.

How much business do you think the UK would lose if it went to such a draconian level across the board? Japanese car manufactures, electronics companies, multi-national corporations? These people want to make money. It's their raison d'etre. They would go somewhere where they could do that. They wouldn't take their work forces with them though.

[DaBeeeenster]

Something like this happened with IR35 and that's exactly what thousands of highly skilled engineers did. We had a mini 'brain drain' I was out of the country myself for over 4 years.

Anyway, the Revenue task force for IR35 set up a meeting with the PCG (Professional Contractors Group) to resolve the issue. PCG said scrap IR35 and the contractors will return. Lets face it they were paying large sums in tax before this without quibble. The govt rep agreed. Dawn Primarolo's famous response was 'they earn too much anyway' and it stayed. They engineers also stayed away. So what happened? The govt removed bars on overseas contractors to come in and do the work. They took their cash home and the UK contractors kept their cash offshore. How many millions do you think govt lost over that little exercise? Shall we mention at this point that prior to IR35 the accountants association warned the revenue that they would make a net loss if they pushed the policy through.

How much business do you think the UK would lose if it went to such a draconian level across the board? Japanese car manufactures, electronics companies, multi-national corporations? These people want to make money. It's their raison d'etre. They would go somewhere where they could do that. They wouldn't take their work forces with them though.

Erm, EVERY contractor I was working with pre-IR35 was paying no more than 15% tax. You think that's fair?

[RVF500]

Is opening an off-shore business account, and paying almost zero income tax "evasion" or "avoidance"?
Is employing your wife and paying her £4.5k a year (tax free) salary evasion or avoidance?
Is having a head office in the Cayman islands, thus avoiding corporation tax, even tho you do no business there, evasion or avoidance?

Under the rules of due diligence it is not easy to have an offshore business account. You need an offshore business and you need a residence offshore. You also need to be non-resident for normal tax purposes. People do get around it. That is illegal. I have an offshore business but I can't use it as I am resident for tax. Unless I carry out work and am paid by a foriegn state. But I can't bring the money into UK without paying tax on it. Payment made in UK will be flagged and if I fail to declare it, thus paying tax, I am liable. That is evasion. My wife could not be a signatory on the business account as she was UK resident.

Paying your wife as an employee in your own company up to her tax allowable threshold is tax avoidance. Is legal and also good tax management as far as I'm concerned. She is entitled to earn up to that allowance annually so why shouldn't she? If she works in another job then she would pay tax on every penny without any allowance as it has been used up.

You are subject to local taxation where your business is registered. If it is tax free then that is local taxation. Bearing in mind that you are still under the rules of due diligence. If you pay yourself a dividend out of company profits and bring it into the country undeclared then you're evading tax. There are time bars on foriegn investment so the money is not frozen ad infinitum. But it is not as simple as it is made out and in fact my own offshore company is dormant as I am not carrying out any work that enables me to use it. And I'm not prepared to spend several years in a cell contemplating my error by risking improper use of it.