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Why Should I Pay Tax?

25th Feb 2015
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If the ultra-rich can avoid and evade tax without any major recriminations, why should the rest of us pay tax at all?

Regular readers of this column will know that since its inception there has been a focus on the inadequacies brought on HMRC by its lack of financing.

Repeatedly, the point has been made that good staff are leaving in droves, which means that for the sake of saving a little bit on the cost side, billions in revenues are going begging.

Recent revelations across the media are making your columnist feel like a seer of incomparable genius. In fact, one might unkindly suggest that only an idiot would extract the teeth of HMRC when the tax gap is so large. Sadly, if this were the case then, perish the thought, there must be idiots on both sides of the House of Commons.

Clients frequently asked the question as to why they should pay tax on a specific source of income if HMRC is never likely to find out about it.

The stock answer has always been that this is a requirement of law. However, if they then point to the HSBCgate fiasco and an individual who was worth £60 billion but didn't bother to pay any tax as there seemed no need to do so, in future we may well merely get scoffed at.

Seeing statistics which suggest that 85% or six out of seven of those who invested in HSBC’s Swiss subsidiary got away scot free is hardly likely to encourage potential miscreants to declare taxes.

It is now time that Parliament funded HMRC properly so that it can investigate and prosecute criminals who defraud it, and by extension all of us, of billions of pounds every year by opening bank accounts in Switzerland and elsewhere.

It seems likely that these accounts with a single bank in one country are merely the tip of a very large iceberg, making the current estimate of the tax gap look drastically understated.

The mathematics could not be simpler. If it costs £100 million in additional employment costs to bring in another £1 billion of revenues, that is a bargain. If it costs five times that, it is still a good deal.

The main issue here is that if the public knows HMRC has no teeth then many more are likely to jump on to the tax evasion bandwagon. This could send the economy into freefall and mean that those few of us who are honest and stupid enough to pay all of the taxes that we owe might find ourselves in a ridiculed minority.

It will be fascinating to learn what the government, the loyal opposition and civil servants at the head of HMRC have to say about all of this in the run-up to the election.

As a recent column made clear, tax is right at the top of the political agenda again and looks like it will stay there for weeks or months to come.

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Chris M
By mr. mischief
25th Feb 2015 10:56

Passports

One simple change I think is long overdue is very simple:

If you are a UK passport holder, you must report all of your worldwide income and gains regardless of whether this is remitted to the UK.

So at a stroke:

1.  Lots of the complex rules on non-doms can be thrown into the bin.  So this measure simplifies the UK tax system.

2.  We give potential tax dodgers a clear choice - pay up or [***] off.

The USA brought in this rule some time ago and apparently the number of passport holders of such places as Grand Cayman and Costa Rica suddenly dropped.

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By chatman
27th Feb 2015 11:55

Tax Property

They should tax property (the land and buildings kind) more heavily. Try hiding that.

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Replying to paul.benny:
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By qhas
01st Mar 2015 11:00

Tax on property

chatman wrote:

They should tax property (the land and buildings kind) more heavily. Try hiding that.


How true. The number of people I personally know who have buy to lets and declare nothing is legendary. On top of that they make massive capital gains on disposal and hide that too. How they get away with it God only knows.
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