Tax is deliberately taxing...

[kynon]

Somewhat topical in the UK at present is the issue of tax. Income tax, corporation tax, value added tax, inheritance tax, fuel duty, alcohol duty, etc etc etc. Much hue & cry has been made in the press & by *hackspit* politicians about the morality of the tax avoidance schemes being used by large companies, and indeed by some high-profile

Comments

[rhino_mittens]

The point that you* are not stealing from the UK in avoiding taxation is fair, however the same principals as described in that email could be used to argue that the MP claiming a duck house on expenses was actually generating business for a duck-house builder, and providing employment for his accountant. Wherever the money goes it is going to go around a circle, except in your case you have the luxury of choosing which direction around the circle it goes.

The fact that tax avoidance as an industry is even possible only serves to exacerbate the disgusting societal divide that is mushrooming in this country (and much of Western society). The rich get richer whilst the poor get poorer; taxes get higher and higher and those who can afford to can pay someone to help them avoid it, whilst the incomes of the lowest common denominator humans get pummeled. I wonder if the tax system was changed to be more 'fair' then less people would be inclined to avoid it? I doubt it; the innate greed of the human character means we want to cling on to every penny earned for our own wellbeing as far as we possibly can.

Without wanting to sound like a complete communist; the aforementioned individual avoiding £12k a year is a drop in the ocean; 500,000 average Limited Company individuals doing the same thing amounts to £6billion. Add to that the thousands of individuals and businesses avoiding a whole chunk more and the amount money missing from the treasury is monumental. Not that we could generally count on the government to do anything worthwhile with it, but if everyone who can avoid tax avoids as much as he or she can for his or her best interest, then where does that leave the state of the country and state services as a whole? Or is that not a personal concern because you've avoided enough tax that you can afford private healthcare and education? Don't forget to congratulate yourself for 'reducing the burden' on State facilities...

Love,

Lowest Common Denominator human (watching as the uncorked grenade sails over the fence)

* - 'you' the indefinite pronoun, not the object...

[kynon]

I like the comment at the end about the grenade - I thought I'd already lobbed one by writing this post... ;-) However, to address your comments more fully:

I agree that the putative corporation/individual is not stealing from the UK per se, unless of course they are funneling the money offshore & thus out of the country entirely...that's a bit naughty IMO. You are correct that the theoretical MP & his duckhouse has the same effect, however, it's very much not the same thing - said corporation has either produced something or provided a service (subject to market forces for price-setting etc), and been paid for that. Simple cause & effect - do something, get something.

The MP's duck house is paid for via the HoC expenses, which comes out of the taxes paid by the UK populace - including the duckhouse manufacturer. The purpose of an expense system is to pay for expenses incurred in the carrying out of an employee's duties - and claiming for anything not meeting that description is fraud, plain & simple. Therefore, the MP's expense claim is much, much closer to "stealing" from the state than reducing personal/corporate tax liabilities.

There is a reasonable amount of empirical evidence with regard to the relative merits of simple taxation schemes (I will look for references later), and it strongly suggests that where the taxation system is simplified, compliance (& hence revenues) increase significantly.
Do I agree with the existence of the tax avoidance industry? No, I don't. I think it's a poor state of affairs, and it reflects badly on the UK (and globally) as a whole.
I also agree that the divide between haves & have-nots is pretty horrendous, and there is no sign of it getting better. However, if one wants to examine the role of taxation in hammering the lower incomes, the current system of income tax allows a certain amount tax-free, and then has the sliding scale. However, pretty much everything that anyone has to buy in order to survive in todays world, is taxed. Food (at varying rates - more confusion), fuel, clothing...and if we consider some little luxuries, like beer - that is also taxed, and has an above-inflation escalator attached to it as well.

To work with the £6bn example you give - that doesn't even come to 1% of what the government spends in a year (see here for details), so unless the corporate side of it adds up to 10 or 20 times that, it's still not *that* significant a figure (all relative of course - if anyone with a spare £6bn wants to stick it in my bank account, feel free!)

Broadly I take your point as regards large infrastructure (health, education etc), however I am quite convinced that the UK could trim that expenditure massively, without adversely affect the important core stuff (health, education, emergency services - all the stuff that the current shower are privatising by the back & front doors.) Perhaps they could start by not spending taxes on paying lobby groups to lobby government & tell people how to live their lives (Example?) We could expand this into a debate over the NHS (never designed to cope with more than about 45 million of a population), but that may be one for another time.

If everyone minimised their tax burden? It might starve the beast that is central government, and they might start focusing on the important things (see above) - and it might just leave a lot of people with more money with which to take care of themselves, which looks like the way things are heading - and I can't say I like the look of it. I don't, however, think that taxing everyone & everything into oblivion is the way to avoid that.