Monday, September 21, 2009

Tax cheats need to think again

Earlier today, Stephen Timms, Financial Secretary to the Treasury made some telling statements during his speech at an international conference on institututional taxation analysis:
"Today I am highlighting recent action, domestically and internationally, that changes the game for those who bend the rules on tax, and for those who break them...."
".... I want it to become increasingly clear to taxpayers and tax agents that for tax cheats, the game is up."
Surely though, "tax cheats" are only those who break the law? Maybe not.

I'm no fan of those who deliberately exploit the law in an effort to reduce or avoid tax liabilities even if they just about manage to avoid(!) breaking the law. To me, and evidently to Mr Timms too, such people are seeking to cheat the system, cheat HMRC and cheat fellow taxpayers. Yes, we can call them all 'tax cheats'.

In concluding his speech Mr Timms added:

"We are today in a different world for tax....."

"We will continue to help the vast majority who want to live up to their responsibilities. But those who try and cheat will find themselves increasingly isolated: by their peers; by Governments; by the international community – as the G20, and, in Britain, our pre-budget report, will show"

"The changed strategic context should be clear. Tax cheats need to think again."

For completeness I have extended below the final observation from my post Bending vs breaking tax rules:
Some people take great delight in deliberately bending the rules whilst seeking to avoid a total fracture. Observers may consider the bending to be so severe that a fracture seems almost inevitable. In such cases it seems only reasonable to me that HMRC should be expected to challenge what has been done, how much force was applied and to apply x-rays to determine the possible damage. Only then will they know if the law was broken or not. And of course sometimes the rules are bent so far that it takes the Courts' further and deeper x-ray to determine whether or not the rule has been fractured and in effect broken.
The debate is moving to consider whether those who do the deliberate and severe bending are just as much 'tax cheats' as those who consciously evade taxes and break the rules. In this connection I gather that there will be some surprises in the Pre-Budget Report along these lines.


  1. MPs need to look closer to home don't they?

    Besides every time they attempt to plug a loop hole one appears elsewhere and the tax system becomes so complicated that even those who administer it aren't sure of the rules.

    What's wrong with a simple, clear, understandable tax system?

    Nothing except that it would mean less work for MPs and less justification for the government to grant favours to special interst groups like one-armed,paraplegic, black single-parent lesbians living in an inner city area.

  2. not to mention the far distant memory of mps bending over backwards to line their own pockets in a selfless attempt to claim expenses so far beyond what any tax payer would deem reasonable to do their very important job of bankrupting the country, rewarding the bankers for their mismanagement and deliverying the bill to the door of the taxpayer, at least until the banks repossess the taxpayer's home. At least we can sleep easy in the firm knowledge that such practices are a thing of the past! It is so important I guess to believe what they tell us and know that their tax policices are in our interests! "Bankers, liars, lawyers and politicians" (accountants deliberately ommitted)- would this make a book title for a book or is it too close to home?

  3. Let he who is without sin cast the first stone!

    A quote from a committed atheist but non the less the quote is pertinent here.

    Whilst I would agree with the ideal that we all pay our fair share of tax I'm afraid that we live in a very imperfect world and to attempt to hold the ideals is athe same as King Canute attempting to hold back the sea.

    Throughout the whole of our society people will utilise loop holes whther it be in tax planning, building houses on greefield land or the many myriad of other examples people will come up with. It's not hard to think of them.
    I personally have no problems with MP's utilising the loopholes to maximise their gains if it is within the law (The answer is that the law should be changed if the people disagree) and I have no problems per se with people using tax planning schemes whilst they are within the current law (And I believe that most planning is declared, I presume, under DOTAS anyway so it isn't as if it is being hidden).
    My attitude, I must admit, stems from the fact that our taxes have been substantially increased to pay for many inefficiences and downright mismanagement. The many increases in the NHS have been squandered on more admin jobs whilst the services they are meant to be providing (The core reason for its existance) decline day by day and it is not the fault of the service providers (Doctors and Nurses). We have far too many quango's, council free loaders, renegade banks etc who create a massive and unneccessary tax burden.
    Should the reason for paying the levels of tax be sorted out then I would have far more sympathy with the ideal. Until then I will advocate upholding the law but if a tax planning excercise is within the law then it is a valid option.

    And as a final comment, it is quite possible that those who are taking advantage of these tax schemes will be actually 1) increasing the tax burden and 2) reducing the government tax spend by growing their business, employing more people(hence PAYE and NI) and becoming competitive against their global competitors.

    I could rant on for pages but hopefully readers will see the logic.

  4. Let us hope that Mr Timms does not overlook his own governments "state owned banks" who have been some of the main "avoiders" or is it "evaders" in recent months since they were baled out. A bit of housekeeping is needed firstly I think