Some news, views and comments about everything and anything, relevant and irreverent.
Last night’s broadcast of BBC’s Panorama lifted the lid on what had been billed as ‘illegal tax evasion’. That begged the question as to what other kind of tax evasion there is. There is of course none. Tax evasion is tax evasion … and it is illegal.
The investigation centred on the euphemistically-named ‘corporate service providers’ and their activities in helping clients (and their ill-gotten gains) hide behind complex international structures of foreign companies, trusts and foundations. Those on camera appeared to have less of a regard for the anti-money laundering regulations that the rest of us pay meticulous attention to. This perhaps is yet another example of the considerable administrative burden that is imposed on the many as a result of the sins of the few … who seem to carry on regardless. Maybe we’ll see the criminal sanctions now being imposed on those who flout the law.
But the Panorama focus reminds too that all done in the name of mitigating tax liabilities is not tax evasion. There is a line to be drawn between tax avoidance and tax evasion, even though the media, the press and even the Government would like us to think otherwise. The ability to mitigate tax liabilities is supported by long-standing case-law precedent. Back in 1936 with the Inland Revenue in pursuit of the Duke of Westminster, Lord Tomlin confirmed that “every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be”.
Closer to home, and a few years earlier, Lord Clyde had made us aware that “no man in this country is under the smallest obligation, moral or other, so to arrange the legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores”.
Denis Healey, the former Chancellor of the Exchequer summed it all up rather succinctly when he described the difference between tax avoidance and tax evasion as the thickness of a prison wall. While the two may seem to converge - and that is certainly evident with many structured tax schemes that have been sold aggressively by providers - there remains a divide that separates avoidance from evasion.
Despite the pronouncement of Lord Clyde, a couple of years ago Danny Alexander (as Chief Secretary to the Treasury) described tax avoidance as morally indefensible … and that view may well now be gathering pace with Google, Amazon and Starbucks (among others) having been drawn into the headlines of late. The Christmas spend will provide some early evidence of whether, as consumers, we revert to the High Street for our purchases - with our thermos flask in hand.
Acknowledging Denis Healey’s ‘prison wall’, HM Revenue & Customs will shortly have at their disposal a new GAAR. It won’t arrive quite in time for Christmas, but a General Anti-Abuse Rule is coming, targeted we are told at artificial and abusive tax avoidance schemes. However, from past experience, we may find that the net trawls in more than expected.
The tax landscape is changing; there is no doubt about that. Evasion has been, and remains, illegal and cannot be condoned. Avoidance is under attack, not for its criminality but for its unacceptability. Structured tax schemes will be ‘outlawed’. However, through all this there is still a place for tax planning … but it needs to be kept sensible. We’ve been saying that at Springfords for some time now.