HMRC's attack on my work on the tax gap is almost amusing in some ways.
Amongst their claims is one that says total tax avoidance in 2009-10 was just £5 billion.
And yet when the 50p tax rate was introduced they reckoned (page 39) there was more than £6 billion of tax avoidance in 2009-10 as a result of shifting in the timing of dividends for that one reason alone.
So, just to make this clear, in 2009-10, the year for which their latest tax gap estimate for tax avoidance was prepared, they said in September 2011 there was just £5 billion of tax avoidance in all (making up part of the total tax gap in their estimate of £35 billion) and yet by March 2012 they were admitting tax avoidance for just one reason in that year exceeded £6 billion. And yet despite that they are still telling parliament their estimate of the tax gap is better than mine.
Now that's an interesting idea, not least because it would require there to be negative tax avoidance for all other purposes and taxes if their claim was to be true.
Alternatively, and as is glaringly obvious, their claim is wildly inaccurate.
Candidly, how they have the nerve to present such misinformation is hard to determine. I hope they get called in to defend such wilful misrepresentations to Parliament, because they should be.
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If HMRC suggest that “real” tax avoidance is so little then this may be because tax evasion is a great deal higher than they think. Also it depends on what you mean by “avoidance” as the Bishop said to the tax accountant.
In the interests of balance and fairness lets hope you both get called in to explain/defend both approaches, Richard. In truth I have to say that regardless of what estimate is accepted (and I have to say I incline to yours as I find your evidence and assumptions more logical) I think most people would take the view that the figure is simply unacceptable. Consequently, the most damning aspect of HMRC position is that they continue to undermine their ability to do much about it by shrinking the organisation. Furthermore, the fact that they follow such a policy – and that the government (Treasury) backs them in doing so – makes it very difficult to conclude other than that there’s a causal relationship between that policy and the approach they take to estimating the tax gap. When I see them putting resources into the organisation (and I don’t mean IT systems of dubious worth) I’ll be happy to revisit that conclusion.
“there was more than £6 billion of tax avoidance in 2009-10 as a result of shifting in the timing of dividends”
Perhaps an obvious answer is that they do not regard such behaviour as tax avoidance.
What happened is that some people took greater dividends in one year in anticipation of higher tax rates in the next. It is difficult to describe this as “avoidance” if it advances the payment of tax, and even if you do think it avoidance you have to discount the cash flow advantage from HMRC.
And as you well know a dividend is not a reward for services to be attributed to a particular tax year. It is an appropriation of profits that have built up since the company started trading.
Osborne called it avoidance
now we are quoting Osborne in the positive?! our movement needs to be more consistent than that.
Absolutely right, Harry, strictly speaking not tax avoidance – but still and very clearly tax dodging.
For anyone who cannot read Hebrew, “tax avoidance” should be 10%
A minimum of three and one third percent for those who do
Funny how the deniers always resort to `it all depends on what you mean by avoidance`.
As if buying a litre of duty free gin on the way to Magaluf was the same as creating and using highly complex, opaque and wholly artifical structures to pretend that £billions of UK profits were made in the Jersey when you sell practically nothing there.
So true
Or the “if you’ve got a pension tou’re a tax avoider” crap
`it all depends on what you mean by avoidance`.
Well given that we have a report that is claiming to measure the scale of tax avoidance then it would appear to me to be a reasonable question.
As it is, TRUK includes capital allowances and double tax relief, use of remittance basis as part of tax avoidance etc, which is clearly nonsensical and incorrect. In fact capital allowances are doubled counted because deferred tax is taken into account.
Just go and read the report and stop wasting my time
I have answered that question endlessly
I assume you would, similarly, be prepared to appear before Parliament to refute their claims.
Of course
It would be a pleasure