Is it wrong to avoid paying tax?

Nor the boss of HSBC.

www.theguardian.com/business/2015/feb/22/swiss-account-secret-of-hsbc-chief-stuart-gulliver-revealed

This came from the HSBC Chairman’s statement this morning:

"The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind us of how much there still is to do and how far society’s expectations have changed in terms of banks’ responsibilities. They are also a reminder of the need for constant vigilance over the effectiveness of our controls and the imperative to embed a robust and ethical compliance culture."

Does he really believe what he said?
Our expectations haven't changed, or at least mine haven't. I always expected banks to be above reproach, to be open and honest.
I did not expect them to help rich people to avoid paying tax, any more than I expected accountants to do it.
The chairman still doesn't get it, does he? And of course, it's all historical, and not happening under his watch!

If the government offers taxpayers perfectly legitimate (to them)opportunities to avoid paying tax why shouldn't they use them?

I take out an ISA each year. The money that goes into it isn't money I am putting into savings at the time I take it out, so it is not, to me or many ISA subscribers, an incentive to save. It is money I already have saved in other tax paying locations. I use my ISA to shelter from tax, income that I would otherwise pay tax on. I am using a perfectly legitimate government-approved method of avoiding tax.

Nothing wrong with doing what is legitimate. The government encourages ordinary people to save by offering tax-free incentives.
It's the people who look for loopholes and go against what the ordinary people expect that is wrong.

An interesting way to close the taxgap.

www.taxresearch.org.uk/Blog/2014/12/17/shut-parliament-for-a-year-to-close-the-tax-gap/

It would be particularly okay for those who think that having a job as an MP is just part-time.
The government makes laws about tax, but not many MPs know what goes on in a tax office. Maybe they should all work in their local tax office for a month to see the results of their deliberations.

All avoidance is legitimate. Only evasion is wrong. The government may offer tax-free incentives for people to save, but I take advantage of the scheme, not by saving but by transferring savings to take advantage of the tax-free wrapper.

Come to that I did exactly what Ed Milliband did. My sister and I did a Deed of Arrangement after my father died so that some of his estate went directly to our children and not us so that inheritance tax would not be paid if we died within 7 years.

www.taxresearch.org.uk/Blog/2015/02/16/tax-avoidance-needed-tackling-in-1938-it-still-does-now/

The second sentence is particularly important.

Beautifully expressed, durhamjen.

Of course avoidance is legitimate i.e. the average person in the street who puts hard-earned money into ISAs, etc.

But is it 'legitimate' for companies e.g. Amazon & Starbucks to legally avoid tax by making mega-bucks in the UK but somehow, cynically, with the aid of smart-arse British accountants, to channel their profits to places like Luxembourg?

All legal but not necessarily legitimate.

I once worked - in the mid 70s - in a posh, private hotel in West Yorkshire. The Italian waiter thought it highly amusing that he had never paid taxes since his arrival to this country in 1955. He also had a very, very nice house in a very, very nice area. Where's the justice!

Yup. Not paying taxes didn't exactly help the situation in Greece!

This is Mark Goldring, the CEO of Oxfam. I bet he pays his taxes.

r.search.yahoo.com/_ylt=A0LEVjTAjPNUl1MA0lonnIlQ;_ylu=X3oDMTEzanRlZmFmBHNlYwNzcgRwb3MDMgRjb2xvA2JmMQR2dGlkA1lIUzAwMV8x/RV=2/RE=1425276225/RO=10/RU=http%3a%2f%2fwww.independent.co.uk%2fvoices%2fcomment%2fif-i-were-prime-minister-id-introduce-a-tax-dodging-bill-that-would-benefit-the-uk-as-well-as-many-other-poorer-countries-10066900.html/RK=0/RS=SJxwyiAA.SYm93bN3nzvXOtWag8-

If international companies can get round tax regulations legally it is because the legislation has been badly thought through and drawn up and the government has failed to block any loopholes.

The people who are to blame for Amazon etc getting away with paying no or low taxes are the government. I am not defending Amazon and their ilk, I am boycotting them, but their decisions to make the most of perfectly legitimate loopholes in the legislation is no more reprehensible than me moving existing savings into ISAs to take the benefit of the tax free protection.

What we want is carefully thought through and thoroughly tested tax measures that contain fewer loopholes and with what loopholes there are blocked quickly. Something the current government has shown no signs of doing.

Of course it's worse, Flickety. The law of unintended consequences does not cover ISAs. The government wants you to have an ISA, to save rather than spend. It's a government backed plan to encourage saving.
Are you saying that the government encourages Amazon to avoid paying tax? What Amazon does is immoral. It's taking money away from the areas that need it.
I wonder how much Amazon pays its accountants?

This shows why it is different.

www.michaelmeacher.info/weblog/2015/02/isnt-hsbc-prosecuted/

The government does not encourage Amazon etc to avoid tax but it is complicit in Amazon's tax avoidance because it enacts legislative measures that are so badly drawn up that tax advisors can drive a coach and horses through them and is then very slow blocking these loopholes and frequently doesn't bother to do so.

The government want companies like this to invest in Britain, bringing wealth and employment and that is why, when, as the result of badly drawn up legislation, companies are able to protect their profits from tax, nothing is done to tighten legislation or block loopholes.

This is also what the government does over ISAs. They were introduced as a way of encouraging new long term saving. But what I and others are doing is not new long-term saving. We are merely taking money that we have already set aside for long term investment and transferring it to a scheme that gives me tax advantages. Were we unable to do this most of us would not take the money and wantonly spend it. It would stay invested for the long term.

The government knows this is happening and is complicit in it happening for political reasons. Those with sufficiently large capital resources to transfer money from one long term savings location into an ISA are more likely to vote Conservative as they are, by definition, better off and better off people are more likely to vote Conservative.

In each case the purpose and motivation is the same.

So what do you do once you cash in your ISA? You put it in a bank account in this country and pay tax on the interest, or put it in an offshore account and do not pay tax?
Obviously you are not concerned about the morality of tax advisers.
Paying or not paying tax should not be seen as a game.
As I said before it's the unintended consequences that are the problem.
I do hope the government end up in court if they intended this to happen.

I do not know, I have never cashed in an ISA and probably wouldn't do so unless I needed the money for a specific purpose, like buying care, or any other necessity in my life, in which case no income would be generated, and I think that would apply to most people cashing in an ISA.

Why are tax advisors immoral? They work within the law. They are no more immoral than defence barristers whose acknowledged task is to convince a court that a defendant is not guilty and put aside any personal opinions they may have about their clients innocence/guilt.

The ball is in the government's court. Most legislation has unintended consequences but legislation is not immutable. All the government needs to do is change the legislation and block the loopholes. That they do not do so means that they are happy for tax to be avoided in this way.

I believe very strongly that the government should tighten the legislation and block the loopholes but in the meanwhile why should we condemn people for working within the laws drawn up by government and approved by Parliament for the benefit of their clients?

Like Flickety I would only cash in my ISAs if my circumstances materially changed. At the moment they are providing part of my retirement income.
ISAs are funded with money that has already been taxed, so what is wrong with having a tax-free income from them?
Essentially it is no different from a pension income, except that the tax-free element of a pension applies when the money is put into the fund, and tax is taken when income is paid out.

People and businesses don't accidentally come across "loopholes" - they hire people - at considerable cost - to actively seek out possible loopholes and concoct complicated schemes to take advantage of them. They are often well aware that they are subverting the spirit of the relevant tax rules, which in most cases is to encourage legitimate investment.

ISAs were introduced to encourage people to save during a prolonged period in which interest on savings has been minimal. I don't know if it is still true but certainly at one time many "experts" were suggesting that putting money into ISAs wasn't a particularly effective way of getting a reasonable return on savings anyway.

Exactly Eloethan- apples and oranges, etc! Makes no sense to compare ISAS and tax evasion or fraud (and the line can be VERY thin).

The shenanigans and complicated schemes concocted are hard to believe at times. As said, I know people who take their accountants on very expensive holidays just for that purpose.

I know of people with very high salaries who got bursaries and didn't pay tax for all the years their kids were at public (!?!) schools- as they rigged the books with their partners for that purpose- making up the money later, etc. And that is a tiny little example.

8granjura*, it is NOT tax evasion and fraud. They are criminal offences. What has been going on is tax avoidance, which is legal. And why shouldn't tax accountants push and probe the legislation to find where its weaknesses lie? This happens with other legislation, whether social legislation, tax legislation or any other. Experts will poke it, probe it and see what they can legally do without breaking the rules.

It has happened with the Human Rights legislation and Terrorism legislation - remember the councils that used that to monitor some parents because they did not believe they lived where they said they did when applying for a school place? These are just the high profile cases. Planning legislation is about as rigid as elastic as councils and developers push it and pull it to get the development they want where they want it.

But as said, the line between evasion and fraud is VERY thin at times.

Now not sure what you are saying here- not sure if I read you right. Are you saying it was 'right' or 'wrong' for Councils to survey people who lied- often going to great lengths, in their deceit re catching area?

I know of some parents who bought their daughter and GCs a flat in the catchment area of the school they wanted the GCs to attend- at great cost. Daughter and GCs then 'pretended to live there' by staying over a few days a week (they still had their house elsewhere of course) so kids could get into the school- when fully settled in school- grand-parent sold the flat with good profit- but in the name of daughter so no tax paid. Now is that right, or wrong? And is it right or wrong for council to try and out such behaviour?

I don't think anyone here has argued that tax avoidance is illegal; just that it is wrong. MPs flipping first and second homes that had been maintained and, often, lavishly refurbished at taxpayers' expense (not to mention taxpayers paying the interest on the MPs mortgages) to make a huge profit wasn't illegal but the consensus was that it was wrong. Of course the loopholes in tax law should be closed but those who set up complex systems to exploit them for themselves or for clients are profoundly unethical.

Fortunately, Flickety, not all accountants think like you.
This one for a start.

www.taxresearch.org.uk/Blog/2015/03/03/this-looks-like-it-could-be-fun-on-monday/

I am definitely going to record this if I cannot watch it.

I think that HMRC do say that tax avoidance does become illegal if it is done for purposes other than the Government intended absent. That means that some of the schemes which depend on tax avoidance measures but are put together in order to evade tax will be illegal. I imagine the problem is proving it.

I think the only thing is to get rid of as many of these tax allowances as possible.