As the political rows over tax evasion, avoidance and abuse rumble on and on with naming and shaming galore, the ultimately reasonable question to ask is: who's to blame? The short answer: the very same politicians who are beating the drum on this topic ahead of a General Election.
Fifty Shades Of Tax: Who's To Blame?
Added 3 years, 6 months ago.
Of all the political sins, hypocrisy is worst - especially for Labour
Ed Miliband’s blunder over tax avoidance has shattered his aspiration to moral superiority
Stepping back from today's vote-grabbing rhetoric, it's worth reminding ourselves that it is every citizen's duty to pay their taxes. We're expected to do this accurately on our returns: not a penny more and not a penny less. And always on time or we face penalties.
However, complexities have built up over the lifetime of successive governments and taxation has grown into a highly complex system, which is open to interpretation to explore what is and isn't legally set out by Parliament. Much in the same way as civil and criminal law evolves through bringing test cases to court and giving rise to legal precedent.
So, taxation is part of The Law and human behaviour will always seek to find advantageous ways of applying it. If someone asked an employee on PAYE to pay more tax, they would of course get short shrift. However, they can claim allowances to reduce their tax and should do so. Indeed, not only is this allowed, the government changes the system to encourage and reward tax avoidance, through ISA's for example.
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We therefore have a long established principle that allows tax to be avoided if it is legal to do so, set by the government itself. And this in turn brings people to ask how they can use effective tax planning to reduce their tax bill within the law, as Ed Miliband did by posthumously re-drafting his late father’s will using a “deed of variation”, allowing him to reduce his own personal tax liability.
Upon scrutiny, it's no longer as straightforward as the politicians would have us believe.
They create the laws that we all bound by, use them for their own advantage and seemingly attack others who would seek the same benefit. Shifting the argument to moral duty is neither here nor there: ordinary, everyday people need to know what is and isn't permissible under the Law so they can plan accordingly. If government wants to stop big corporations from paying reduced levels of tax because of a public backlash (remembering the hundreds of thousands of people they employ who pay PAYE) then they alone have the power to enact laws which no longer makes it possible. This should be done fairly and without overly focusing on one sector of business, such as SME's, and leaving big corporates alone.
In the meantime, we as an accountancy practice have our continuing professional duty to give the best possible advice on proper tax planning and how to legally pay what is due: not a penny more and not a penny less. But always on time.