Friday, December 26, 2008

Who wants to pay the 'right' amount of tax?

The Freedom of Information Act only seems to reveal interesting results after 'battles'. I've just read about one in Private Eye (I was catching up during the Xmas break).

After a 7 month battle, HMRC has released the results of a survey conducted in 2004 amongst senior tax inspectors. Apparently they classified 16 of the 102 (sic) largest companies operating in Britain as "serial [tax] avoiders"and 40 as "opportunistic avoiders". Thus these Inspectors believed that 55% of the biggest companies were consciously avoiding tax (presumably in an "unacceptable" manner).

The Private Eye story suggests that this runs contrary to the alleged assumption within HMRC that:
"The majority of businesses want to pay the right amount of tax at the right time."

And that got me thinking. Does anyone really believe that mantra?

Coincidentally I was debating a similar point, concerning the general appetite for tax avoidance on another blog last week where I stated that:
I accept that many people do not want to ‘abuse the law’.

However I think that most people DO want to keep their tax liabilities to a minimum. They ask their accountants (and their friends) “What can I do to pay less tax?” “How can I pay less tax?” “How can I avoid having to pay all this tax?” And of course the weekend papers are full of ads for guides as to how to AVOID IHT.

To me this all indicates a desire amongst the general public to AVOID paying more tax than necessary.

Does that make 'most people' tax avoiders'? Of course not. But it does suggest to me that few people willingly pay their taxes without hoping that there are ways to reduce the sums due to HMRC.

Those who know me will know I am no fan of what some might describe as 'abusive' avoidance schemes. And, of course, I am no longer in practice myself as a tax adviser - for reasons that I described in detail last July. So I am keen to distinguish such schemes from simple 'good advice' of the sort that can be obtained from independent tax advisers.

Does it all come down to a question of what is the 'right' amount of tax? Is the 'right' amount of tax the same as the 'lowest' amount that can be paid without breaking the law, without lying, without hiding income and without overstating expenses?

What do you think? Do you agree with my definition or can you offer your own?

1 comment:

  1. The term "the right amount of tax" sounds wonderful but means nothing.

    It has been invented by Government spin-doctors because it sounds good. It is incapable of definition.

    I stick to "the lowest amount of tax without breaking the law".