Excessive Tax Avoidance - Blame Politicians

As the country enters the general election period, a time of spin and political advantage, it is time we questioned not just individuals about their tax affairs, but the politicians who created the laws left so open to exploitation.
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Tempting as it might be to pick a fight with very rich people over their tax affairs and the bankers who help them, we should be wary.

Tax avoidance is clearly going to be a key issue in the general election. But the signs of a balanced debate are already rather hard to find as it becomes poisonously political, mired in claim and counterclaim.

Nobody supports tax evasion, which is illegal, but tax avoidance is the act of reducing the amount paid to the exchequer through legal means. Very few people of any background volunteer more taxes than they owe. Why should the rich be any different? What is different is that they usually have clever advisers, but these are bound and regulated by law and compliance requirements.

What a pity more attention is not paid to politicians and the poor quality of tax legislation, which allows the loopholes in the first place. Instead, we allow legislators to mask their own dim failures by asserting that people suddenly have some sort of ill-defined moral obligation to 'Pay More' when the public mood demands.

The Public Accounts Committee has just produced a highly critical report, as ever, this time pillorying accounting giants PricewaterhouseCoopers for "the promotion of tax avoidance on an industrial scale." Note, not tax evasion, which would clearly mean prosecutions. But the scold is still explicit.

The result of this semiotic dance between 'evasion' and 'avoidance', with the general public left befuddled by which is which, is that tax advisers are now wrestling not with clear laws (I wish) but a 'general anti-abuse rule'.

The key word is 'general'. Taxation is fairer when it is specific, and politicians are fairer when they admit to either deliberately, as they did with the now suddenly unacceptable film partnerships, or accidentally incentivising people to reduce their tax bill in particular ways. In the case of film partnerships this was to boost the UK film industry..

The latest claims drowning the banking giant HSBC and Her Majesty's Revenue and Customs are unedifying on many levels. But they also appear to pre-date very significant changes and advances being made globally, as by necessity they must be in the complex world of the super-rich, to force disclosure or money held abroad.

But there is no denying that politicians are tapping into an unease about wealth distribution, but delivering the public a dizzying array of stories about tax havens, dodgy money and, inevitably, Switzerland is not helping.

The awkward question is whether that unease is fully justified, appealing as it is to feel the thrill of a righteous indignation.

The UK revenue collection service is, in fact, one of the most efficient in the world, collecting about 93 per cent of money owed. As about one per cent of the population contribute about one-third of that tax take it seems reasonable to assume that many of those paying their dues are the super-rich.

As the country enters the general election period, a time of spin and political advantage, it is time we questioned not just individuals about their tax affairs, but the politicians who created the laws left so open to exploitation.

There is a serious danger when a moral edge is added to any legal requirement: Power stops lying in the language of law, which is largely laid out and open, but moves to interpretation and ever-changeable mob sentiment. That is not fair or rational, which is what taxation should aim to be.