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Tax and Morality Are Back on the Agenda

14th May 2014
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Just when you thought it was safe to get back into the water, tax is hitting the headlines again.

Sadly, this is not another story about a grateful country congratulating tax advisers on their generous efforts to take the weight out of the Treasury's pockets.

Instead, within the period of a week, a stream of stories about taxpayers not paying as much tax as the media feels that they should have once again sullied the good reputation of our fine profession.

This has then been counterbalanced by news of a global superstar desperate to settle on our shores without worrying about some sinister new powers that have been granted to the Revenue.

It was only last week that this column contained a relatively light-hearted overview of tax strategies used by the ultra-rich. Now, some of those techniques are leaving big names caught in the spotlight.

Is it right that one of the largest online businesses in the world is paying almost no tax in this country despite having a turnover equivalent to that of some Third World countries? Similarly, should stars in the music/TV industry and the world of sport be permitted to shelter their own millions or even billions from the taxman?

Many tax advisers might possibly only object to the success of carefully devised planning strategies because they didn't get there first and haul in the kind of fees that he or she can only dream about. Others would have moral objections to devised schemes that smack of aggressive avoidance or even evasion.

The man or woman in the street will be shocked and horrified, although to be fair to the online retailer they did clock up some pretty impressive losses in the early years as their own private dot-com bubble threatened to burst.

Similarly, Margaret Hodge and the House of Commons Public Affairs Committee will almost certainly take the view that tax rates of no more than 1% or 2% are not in the best interests of the country and, indeed, should not even be sought by those given honours by HM the Queen.

Should we worry about such high profile publicity for our business?

Increasingly, reputational risk is becoming an important factor for those that wish to minimise tax while appearing to be legal, decent, honest and truthful.

As a result, professionals are also frequently taking a more conservative view of where the line should be drawn between tax avoidance and tax evasion, helped by legislators introducing more and more anti-avoidance measures, as well as the GAAR.

At times, one does wonder whether the reason for the public outrage is more to do with jealousy than anything else. Indeed, one suspects that many people are paying less tax than they should, albeit by using less sophisticated techniques than those currently enjoying media headlines.

Typically, this involves the use of cash and measures that even hard-nosed members at the sharp end of the tax avoidance industry would find worrying.

Eventually, there was always the likelihood that the government would begin to use stronger measures to protect its revenues.

That is the case. At the same time as these three stories were doing the rounds, another attacking the controversial principle that HMRC can now delve into miscreant's bank accounts and take what they think they might be owed was getting equally negative publicity.

In yet another headline-making tax story the tide is running in the opposite direction.

While the UK Exchequer may be highly excited at the prospect, one of the biggest takeovers in global history also seems to be almost entirely motivated by the opportunity to take advantage of the very competitive UK corporation tax regime.

Some readers might think it odd that apparently unimportant issues such as performance of the merged entity and welfare of opportunities for staff are playing second fiddle to a desire to escape an effective 27.5% corporation tax rate in United States and replace it with a maximum of 20% here and probably far less for a companies are heavily dependent on research and development and patents.

If nothing else, it seems that there is every prospect of yet another exciting tax summer for those in our glamorous business. This columnist for one is cheered by the prospect.

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