Don’t just blame the tax avoiders

Written By: John Holden
Published: November 21, 2017 Last modified: November 26, 2017

The publication of the Paradise Papers, some 13 million documents detailing the enterprising tax activities of the global affluent class has raised yet again the vexed question of how to ensure that this class, like you and I, pays its dues.

The responses of those now in the spotlight have been wholly predictable and, in the main, convincing. They have asserted that they have not done anything illegal, but have merely shopped around – on a global scale – for the most competitive tax rates.

Around 18 months ago Tribune published an article by me in which I sought to allocate responsibility for the institutional failures in this area. Most of the points made then remain valid and I think it’s worth reiterating a couple of points from that piece.

In recent years a few prominent companies, like Apple, have been put under a powerful spotlight because of an understand­able reluctance to pay the amount of business tax deemed fair or appropriat. On this subject I have to admit that my sympathies lie wholly with the beleaguered bosses.

In my view the sole responsibly for the current shambles lies with the government and its dubious offspring, Her Majesty’s Revenue and Customs (HMRC). It is the responsibility of the government to specify tax liabilities and it is the responsibility of HMRC to collect the taxes so specified.

Sadly HMG has proved itself unable or unwilling or both to establish a simple set of tax rules and successive governments have compounded this error by appointing a series of carefully selected bunglers to collect the tax.

Let us be clear: much, if not most, of the blame for the failures and problems lie not with the dodgers/evaders/avoiders or even with the much maligned HMRC but with the government.

How so! Because the evaders and avoiders did not write the tax rules – they merely exploited the tsunami of rules which poured out of No 11 … The avoiders and their near identical brethren, the evaders, did what sharp practitioners have done since Adam and Eve submitted the first recorded tax returns – they exploited the loose wording to minimise the share collected by the state and to maximise the amount retained by the businesses.

To complete this argument – the bigger the true profit, the greater the incentive to hire a specialist tax planner. Even a large payment to a tax expert is miniscule compared with the inevitable savings.

A second important point is the role of the EU. Is the taxing of businesses likely to be more effective if we vote for the Brexit option?

That’s easy to answer: the vote for Brexit was greeted with the popping of champagne corks around the City of London. There was joy unbounded as the avoidance and evasion opportunities thus opened up were glimpsed, and as soon as the effects of the champagne wore off, sharp young movers and shakers were put to work to flush out and list the tax planning options to minimise taxes paid.

Quite simply it is much more likely that the arcane practices of the avoiders and evaders would be curbed if Brexit had been rejected, because the policing of taxation can be carried out more effectively when working together with 27 partners than in splendid isolation.