HMRC have published the results of a survey that they have undertaken on people's attitudes towards tax avoidance this morning. This is, perhaps, the most telling chart:
Thos responding had been told:
Tax avoidance is working around the rules of the tax system in order to pay less tax than Parliament ever intended — so operating within the letter, but not the spirit of the law. Tax avoiders often enter complicated, artificial ‘schemes' that have no real financial purpose, other than to avoid tax. You may have heard about high-profile users of these sorts of scheme in the news. Some of these schemes are sold to potential users by a promoter — that's why we can say that they are ‘marketed'. This next set of questions focuses on this type of marketed tax avoidance by individuals rather than businesses.
Those responding were not, then, confusing avoidance with evasion. It was interesting that there was a belief that the practice was common:
More interesting still were the analyses of attitudes to tax avoiding behaviour such as this (note the very low sample base):
And this:
It is apparent that even the apologists - and there aren't many of them - have difficulty making up excuses.
The tax profession should take note.
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When trying to resolve that actual incidence of avoidance though, it will be worth bearing in mind the conclusions from another bit of HMRC sponsored research ( http://tarc.exeter.ac.uk/media/universityofexeter/businessschool/documents/centres/tarc/publications/discussionpapers/Mesuring_tax_compliance_attitudes.pdf ) which shows that whatever people may say about tax behaviour, they still tend to the “do as I say, not as I do” approach when it comes to their own affairs. The important bit isn’t getting people to *say* they think it’s wrong and shouldn’t be done, it’s getting people to *actually * think it’s wrong and not do it. (cf public outrage re google, apple, amazon VS revealed preference when actually using a search engine, phone/tablet, online sales outlet etc; impact far smaller in reality than in surveys)
I take the Exeter work with a pinch of salt
I am not always convinced tax academics are objective
Didn’t you tell the Select Committee that there were no university courses in Tax in this country? How can there be tax academics?
There are no courses
There are academics who teach on other courses e.g. Accountancy or me on IPE
“The tax profession should take note.”
Amongst others.
This and many other surveys on important financial or constitutional issues continue to show out of touch our “representative” political system is with the views of the voting public.
If nothing else, it shows how unrepresentative our politics and the machinery of the state has become. In the world where technology is being allowed and encouraged to change almost everything – it should be allowed to replace political representation with a far greater amount of direct democracy on key issues affecting the population as a whole.
While there are obvious dangers with majority rule as the only basis of government, the views of the majority should be much more greatly obtained, considered and applied where appropriate by any government who claims to be legitimate.
Where a government chooses to ignore the views of the majority they should be forced to explain themselves, for example where they are protecting the poor, weak and powerless minorities which I am sure most normal human being will accept as legitimate use of representative power.
The once in 4 or 5 year chance to have your political say, should be sent into the pre-information technology past where it rightly belongs.
This survey was undertaken in July 2015. Given subsequent events with Google et al, I imagine the percentage of people saying it is never acceptable to indulge in tax avoidance would be much higher.
It’s a rather encouraging response from the public, and gives the lie to much of the right wing propaganda, that somehow tax avoidance is OK, because of the legal loopholes that allow it. It’s the government’s fault again! Well, yes partly, and HMRC should work to change the law. But it’s also a moral issue, and clearly people disapprove strongly in principle.
I thought it was encouraging as well
I think saying that people “strongly disagree” is a little too abstract.
By that I mean they will strongly disapprove when the question is applied to a faceless corporation or ‘the rich’, but if it was applied to themselves. For example, refusing in principle to pay a handyman in cash, not moving assets between a married couple for tax reasons, etc.
I may be a cynic but people are very pious when it’s not their money.
The sample looks big enough to be realistic
But I do think the perception that the practice is widespread will be ‘amongst other people’
As I’ve said, or at least intimated, before, Richard, the “amongst other people” syndrome has to be, at least partly, because, when the “little” people see the Googles of this world getting away with it on a mega-scale, they surely feel little motivation to change their own ways, particularly when HMRC so aggressively focus their collection efforts on the “little” people. This, I suspect, is a side-effect about which this government cares not a jot because they know that the “little” people are the softest target.
I believe that this might be a narrative that could be developed to their benefit by Labour.
I agree entirely
Nick makes a good point below. “Tax morale” is an important element in a ‘voluntary’ system like the UK; HMRC are compounding the damage to that by doing things like misusing law to penalise farmers ( http://www.accountingweb.co.uk/article/hmrc-puts-pressure-farmers/596922 ) while apparently going soft on big business – each individual small taxpayer is a soft target – but statistically, most of them will get away with it, and they’ll feel justified in doing so. I’m horribly afraid of ending up in a bizarre and counterintuitive world where net tax take drops (because big business is able to manage liabilities down, and small taxpayers work to mimic that outcome) while the few SME/Micro cases that *do* get picked up are presented as abuses of administrative power, destroying tax morale still further.
Richard – on rereading, my last submission makes it look as though I’m describing the targetted farmers mentioned in the AWeb article as “getting away with it” – which is the opposite of what I meant; seeing injustices like that is what’ll make a cash in hand evader think they’re ‘justified’, and *they’re* the ones who’d be getting away with it. Tax exists to serve society, not the other way around, and destroying elements of society like hereditary family farms is a perversion of the system.
If you can edit the post to make that clear please do; otherwise I’ll have no quarrel if you discard it, thanks, J (Now not sure how many times, if at all, you’ve seen this message. Apologies for any duplication; I blame technology)
Richard, I was wondering if anyone has reported problems with their posts disappearing since yesterday. I’ve had this problem since re-starting my PC yesterday afternoon and whereas my submissions previously showed as awaiting moderation until approved, they now just disappear off into the ether?
Not sure if this is a browser issue, I use Firefox not the dreaded Google, so have changed some of the privacy settings to see if this makes any difference. If this post disappears as well I will try emailing you instead.
I hope I haven’t been banned! (don’t think anything I wrote was that offensive?)
For reasons I am not sure about you got treated as spam
I have corrected that now
Apologies. It was quite unintentional
Call it a fat finger error on the iPad
…. numerous other surveys will be required before the wealthy elite even bat an eyelid. By then freedom of speech may be severely curtailed and criticism of the government or elite could result in incarceration…
I avoid alcohol taxes by not drinking. I avoid tobbaco taxes by not smoking. I avoid airport taxes by not flying. I avoid a lot of petrol taxes by not driving a lot. I avoid all income tax by not being paid much. Am I going to be forced to take up smoking, drinking, flying and long-distance driving just force me to stop avoiding those taxes? When is the single person’s tax allowance going to be abolished to prevent me from avoiding paying income tax?
Stop talking drivel
You do not avoid taxes by behaving as you do
You make free choice which ha[[ens to have tax consequnce
Just read what tax avoidance is defined as and stop wastinbg time writing utter nonsense here
“Tax avoidance is a practice of using legal means to pay the least amount of tax possible. This is different to tax evasion which is the practice of using illegal methods to avoid paying tax.”
jgh is of course wrong, as the above definition shows. Of course there are a wide range of tax avoidance activities and the HMRC survey deals with only one.
sort of thing you hear spouted at the IoD after a good dinner.
You can also cheekily avoid the 5p bag charge by not buying a plastic bag.
Absurd argument.
What difference does it make to legal activity whether the majority approve or disapprove?
I’d imagine most people think consenting adults having an extramarital affair is unacceptable.
But it is legal.
The state cannot touch a hair on the heads of those who engage in it. Indeed, the state has a duty to protect them from harm from those who disapprove, even if the majority.
Oh dear
You really do not understand what a general anti-avoidance principle properly enacted could do, do you?
Yes, and I have lived in such a country.
Australia.
Has had such a principle in its legislation since the mid 1980s.
The story I get from mates who work in the area (and my brother was a tax accountant until recently):
1) the ATO doesn’t like litigating it, so there is a lot of horse trading with the big corporations with the stomach and the resources for a fight. Deals like the Google one here in the UK are commonplace and un-newsworthy. Tax becomes negotiable at the big end of town.
2) given the horse trading, there are lots of defections from the ATO into the big accounting and law firms at senior levels. Not hard to see the value of their contacts and understanding of how the system works.
That;s not how it works
Because of clearances avoidance is stopped at the outset
Your blog title is entirely misleading.
The survey makes clear that it is the use of marketed artificial tax avoidance schemes that people find unacceptable.
That is clear from the HMRC extract. I would have voted the same way.
That is a far cry from tax avoidance in general. For example, by choosing to operate as an LLP rather then through a company and paying salary, you are avoiding employers’ NIC. A tidy saving. This would clearly fall within avoidance planning as any professional in the industry would acknowledge.
Hoe can trading through a medium provided by law which results in exactly the same sum due as would be payable in partnership, which would be the alternative, ever constitute avoidance?
If you’re going to pick a silly argument at least make it one that has an iota of substance to it.
Exactly the same sum is due?
Richard, I mentioned a company and an LLP. They both provide the same limited liability in law. Some professions cannot be companies (Lawyers and accountants for example) but bloggers and authors can choose to operate as a company or an LLP.
Operating through a Ltd company with profit distributable to a director of £70,000 then paid as salary would result in:
Employers’ NIC – £7,504
Employees’ NIC £4,521
Income tax £14,401
Net in the directors’ pocket £43,773
You need only one director/shareholder so there is no need to co-opt someone who does nothing into the business.
Choosing instead an LLP with the same £70,000 sees:
Class2 NIC – £145
Class 4 NIC £3641
Income tax £17,393
Into the Members pocket goes £48,821. Over £5k which would have gone to the government is saved.
Of course you do need another person involved to actually form an LLP. Even if that person does next to nothing and it’s a little….well some might say artificial.
Of course it’s all legal and good tax planning. Or is it avoidance? The boundaries are so grey these days.
So wrong
Accountants can be companies
But you ignore the fact that partnerships are taxed in exactly the same way as LLPs
As are sole traders
So if the alternative was that (and it would be, for example, in my case, where an LLP was used solely to differentiate activity from my unincorporated accountancy practice) then there can be no avoidance at all, however hard you pretend
And using a structure specifically allowed by law is also quite explicitly not avoidance
So I suggest you stop making yourself look stupid
No, your choice to differentiate from your unincorporated accountancy practice was either an LLP or a company. You chose an LLP. It has saved you on your overall tax/NIC bill; that is your right under the current law. Stop wriggling and admit it. You COULD have set up a company. You have operated through companies in the past (during which time you paid yourself dividends and again saved NIC)
Multinational companies have the choice under the current law where they locate HQs and where they place IP. That’s their right.
Just take the Dianne Abbot line. At least that is honest.
I chose an LLP because I had previously been a partner for many years
And so I was comfortable with the format – which I would recommend to others – and which the law quite specifically permitted
And you are just wasting my time
“And using a structure specifically allowed by law is also quite explicitly not avoidance”
So which of Google’s, Amazon’s, Starbucks, Microsoft et al’s structures are NOT specifically allowed by law?
The used arrangements that specifically exploited gaps in international law
They were not allowed by law
To claim the law intended those outcomes is to make yourself look a fool
Ed note:
You made your point
Now you are simply in breach of the comments policy
This and future comments will be deleted since I have fully replied to anything you might say
Is a partnership really reflective of reality though. I don’t see your wife posting many blogs or doing public speaking about tax. Some people might call having your wife as a partner solely to avail yourself of an LLP artificial. Devils advocate, I personally don’t have an issue with anyone choosing one form of incorporation over another
Does she risk capital?
Yes
Does she take part in management decision making?
Yes
Does she discuss a great deal of what I do before it happens?
Yes
Is she underpaid?
Probably
Now stop wasting my time
Surely “use of ISAs” is both within the letter and spirit of the law, so offering it up as a “marketed” avoidance scheme seems a little incongruous?
The use of ISAs is never tax avoidance
If I transfer half of some shares I own to my wife the day before we sell them so we can both use our annual CGT exemption the law allows that.
Quite clearly the writers of that law must have envisaged such a scenario. They are not stupid.
So you would presumably accept that this is not tax avoidance either?
I think that is avoidance
But the law does not stop it
I would change the law
I think he is making reference to an ISA because it is mentioned in Table 2 as a reason why tax avoidance is sometimes acceptable.
To be honest it tends to suggest that even when presented with a quite detailed definition of tax avoidance some of the people answering the questions hadn’t a clue what they were being asked.
6% got it wrong
That’s amazingly low
It’s a stupid survey, really. Firstly, many of the sort of people who strongly agree that it’s wrong, no doubt have their own hypocritical practices. For others, it’s “wrong” because they can’t do it, or are jealous. The point is that it’s easy to be high and mighty when it doesn’t affect you and this is a blindingly dumbed-down survey. Ask a slightly different question and you’ll get a different answer.
Next week : “90% of turkeys strongly disagree with celebrating Christmas”
🙂
You have no clue that is true: if you just want to bring prejudice here please do not waste my time
So I am able to flatly contradict, with proof, your claim that choice of LLP was because that was the only format you were comfortable with and you are too much of a coward to print it.
What a pathetic person you are. Courageous state? moral hypocrite.
With respect, you proved nothing except the fact that you’re a pedant who makes up what you think are facts
And no one is interested in such people
Richard. Nobody is interested in made up facts, but most people are interested in debate. I’ve seen you threaten at least three posters with bans in the last few days because you disagree with them. I refrain from posting in the main by now but as an observer you risk turning your blog into an echo chamber which would have little value.
Comments are only deleted here when racist, abusive, repetitive or inappropriate to the issues under discussion
I am, in fact, extremely generous in comment moderation. Well over 90% get through