Q. As the political party season starts, the headlines have been full of announcements on taxation, both tax avoidance and evasion. I wanted to know what the outcome of this could be or whether it may prove to be yet another case of political persuasion?
A. As the Political Party Conferences get under way, the statements made regarding taxation certainly seem to have grabbed the headlines. Although just how an already beleaguered H M Revenue & Customs (HMRC) will cope with any additional work remains unclear.
Both Deputy Prime Minister Nick Clegg and Chief Secretary to the Treasury Danny Alexander have been at the forefront of comments. Likening tax evaders to benefit cheats, Alexander said the Government would make £900m available over the spending review period to tackle tax avoidance, evasion and fraud. The new proposals could help to recover £7bn a year by 2015 in taxes currently lost through avoidance, evasion and fraud. Addressing the Liberal Democrat party conference he stated:
“There are some people who seem to believe that not paying their fair share of tax is a lifestyle choice that is socially acceptable. Just like the benefit cheat, they take resources from those who need them most. Tax avoidance and evasion are unacceptable in the best of times but in todays circumstances it is morally indefensible. We will be ruthless with those often wealthy people and businesses who think they can treat paying tax as an optional extra.”
The Government have stated that HMRC will be given extra resources to create a dedicated team of tax inspectors to focus on both offshore tax and online tax evasion. The stated aim of this team will be increasing the number of prosecutions for tax evasion to five times the current figure. The Government looks to increase the number of targeted tax checks from 5,000 a year to 150,000.
Half of all the people paying the new 50p top rate of tax will have their tax returns reviewed by a dedicated team of HMRC inspectors every year.
Nick Clegg, speaking on the BBC’s Andrew Marr Show, insisted the Government was committed to ensuring that everyone paid their “fair share” of tax. “You cannot ask millions of people in this country to have restraint in pay, to have their pensions looked at again because we are having to deal with the deficit and allow people who can pay an army of lawyers and accountants from getting out of paying their fair share of taxes.”
It is here that tax professionals and accountants have concerns. It appears that the Government is losing the long held disiinction between evasion, which is illegal, and avoidance which is the legitamate use of current legislation to reduce the tax liability of an individual or business.
Many professional commentators have commented that those who work hard to create wealth shouldn’t be penalised in the same way as “benefit cheats” for attempting to minimise their tax liabilities within the confines of the law. The job of tax advisors is to ensure their clients work within the law to minimise tax.
Everyone would appear to agree that HMRC should be given the resources to tackle evasion and recover the tax currently being lost to the Treasury. It is Nick Clegg’s statement on the BBC’s Today programme “I think it is the duty of the Government to make sure that the loopholes in the tax system we inherited are minimised so that those opportunities dont arise” that has caused more concern.
We will have to wait and see just how far the current Government is prepared to go to to close the loopholes they see as being exploited and how quickly the move to do so. One thing is clear though the Government would appear to be set on being “tough” in its attempt to maximise tax yields.
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