Taxing times

I take a very simple approach to taxes. You should pay them.

I have no time at all for those individuals who, and corporations which, indulge in artificial schemes designed to avoid what they should properly pay.

Despite all the warm words and promises, Conservative governments have consistently been reluctant to legislate to close down loopholes and to pursue tax avoiders.

A report1 this week from the Tax Justice Network confirms the extent of the issue. It found that the UK has “single-handedly” done the most to break down the global corporate tax system which loses nearly £400bn to avoidance. The amount dodged globally each year is more than three times the NHS budget or roughly equivalent to the entire Gross Domestic Product (GDP) of Belgium.

The UK is by far the world’s biggest enabler of corporate tax dodging, helping funnel hundreds of billions of pounds away from state coffers. Of the top 10 countries allowing multinationals to avoid paying billions in tax on their profits, four are British overseas’ territories. Tax haven territories linked to Britain are responsible for around a third of the world’s corporate tax avoidance risk – more than four times the next greatest contributor, the Netherlands.

At the top of the list are the British Virgin Islands, Bermuda and the Cayman Islands – all British overseas’ territories. Jersey, a Crown dependency, is seventh while the UK itself comes in thirteenth. Yet, this Conservative government is still failing to take the measures required to ensure transparency in the UK and in the overseas’ territories and dependencies.

However, it has decided to pursue workers who entered into schemes of disguised remuneration over the last decade. Disguised remuneration is an aggressive and contrived form of tax avoidance that involves a loan, which there is never any intention of repaying, being routed via a low or no-tax jurisdiction and then back to the United Kingdom, to avoid income tax and national insurance.

Unfortunately, many low-paid workers in service industries were required or conned into these schemes by ‘tax advisers’ and bogus umbrella companies. If something looks too good to be true, it almost certainly is!

However, there were thousands of well-remunerated individuals who sought out these schemes. It is estimated that between 50,000 and 100,000 people were involved. Finally, HMRC woke up and, in 2016, the government decided to act on these unlawful schemes and require payment of the proper taxes and dues. More than £1bn has now been reclaimed – 85% of it from employers – but there is still a long way to go.

Generally, I support the approach that the government is now taking. However, I still have some concerns about how it is proceeding. There does need to be a differentiation between those people, mainly low-paid, who were conned into the schemes and gained little benefit from them – most of the benefit went to the agencies and employers – and those, mainly well-paid, who entered the arrangements in full knowledge of their gamble.

I have little time for those people who are now making a lot of noise because they are being told that they have to pay £500,000, £700,000 or even £900,000 that they avoided by their own actions.

1 https://www.corporatetaxhavenindex.org/

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