There’s no avoiding this debate on tax
29 Sep 09
Is tax avoidance “morally wrong”? Some leading UK politicians have recently been quoted as saying it is. It is clear that the Pre-Budget Report will seek to come down hard on some schemes and demand greater disclosure
The role of language can’t be ignored here – phrases such as “unacceptable tax avoidance” are used with greater frequency by politicians, such that the lines between avoidance and evasion are becoming increasingly blurred. There is, of course, a big difference between avoidance – which is legal – and evasion – which is not.
Tax is a business cost which must be addressed like any other. Directors must run their business in the most cost-effective manner and so minimising tax, providing it is done in accordance with the law, should not be viewed as unethical. The grey area comes in complex schemes which have no discernible business purpose and which are solely designed to exploit loopholes in the law. ICAS regards these more aggressive and artificial schemes as unacceptable.
Making tax avoidance a moral issue is a clever move by politicians. It takes it from the business pages to the news pages and creates more noise around the issue. The same politicians would do well to remember that they are complicit in the creation of a tax system that is now so complex that it allows the conditions for “unacceptable tax avoidance” to flourish. It is an issue that ICAS and business organisations have banged the drum about for some time – greater tax simplification would leave fewer opportunities for tax avoidance that is regarded as “morally wrong”.