Time for a new approach to tax
You might also be interested in
Replies (17)
Please login or register to join the discussion.
Love it
What a wonderful list Simon. I"ve replicated it (with due credit) on the Accountant jokes and fun blog.
Mark
Seriously ...
... a tax on disposable batteries. These days, rechargeable batteries are very good.
But really, all we need is one single tax, a single flat tax of say 20% paid purely by all businesses as a percentage of their turnover. Easy to operate (like VAT) and monitor, also cheap to collect. We could scrap thousands of pages of law, scrap lots of governement employees and accountants!
But a turnover tax wouldn't be popular...
... and it wouldn't work either.
What about all those small businesses, particularly new businesses, that makes losses? A business could have a high turnover and still make a significant loss so I can't see them being thrilled at paying taxes too. Look at the optional South African example that Simon has mentioned before and you'll see it hasn't been popular with businesses at all. And what about all those financial businesses that have no "turnover" but still show a profit? Going to give them a free ride?
Wishing for some mythical nirvana that delivers simplicity, provides the Government with revenue and encourages businesses is admirable but this isn't it.
Any ...
... business that keeps making unsustainable losses would go bankrupt. It is capitalism, rough and tough but a reality.
I didn't wish for, or expect, a nirvana. I do expect a flat tax on turnover of all businesses/commercial endeavours, without exception, to create a free market with a fair tax rate that would then promote investment and further growth of the UK economy. Obviously the definition of a flat tax would have to include certain exceptions, otherwise some could avoid paying their legal taxes-as with any system.
Irrespective of any type of tax system, HMRC would still have to be overhauled.
But that's too easy...
It's all very well to say "obviously the definition of a flat tax would have to include certain exceptions, otherwise some could avoid paying their legal taxes-as with any system" but much harder to define what that means in practice. What exceptions are you including? Fines? Penalties? Entertainment? Others? All of a sudden it doesn't look very flat. And would it be optional or mandatory? If optional then we'll be in VAT FRS territory. And I'm still not clear what you would do with the businesses that have but turnover but turn a profit?
I'd also question "any business that keeps making unsustainable losses would go bankrupt. It is capitalism, rough and tough but a reality." The current system to my mind is there to encourage businesses taking a risk and which might not turn a profit in the first year or two. Isn't that why there is additional loss relief for unincorporated businesses and carry forward? I don't see your method as necessarily "promoting investment and further growth of the UK economy" at all. Seems more likely to discourage businesses and South Africa's experience, where the turnover tax is optional, has seen very, very few businesses sign up.
You also say that 20% is a "fair" tax rate? Is it? Why not 25%? Or 30%? Or 10%? To me the rate is a side issue and is a matter for the Government of the day. I don#t think we should confuse the technical working of the tax system and the rate. We'd be better concentrating on the technicalities and not the rates.
How about changing attitudes?
My wish for 2010 is an end to the combatitive relationship with HMRC. We criticise endlessly, most of the time with some justification, but I'm personally tired of the hipocrosy of those who see it as their role to promote agressive avoidance schemes while at the same time complaining about complexity and too much tax. Minimising taxes paid by clients is one thing but too many people look in every dark alleyway is really pushing it. I'd like to see us collectively as a profession do alot more to stop this game because I believe it will stop much of the complexity and improve our standing with the authorities (and theirs with us as a result). For every dubious way of avoiding the 50% tax rate, we'll just see more legislation and ultimately higher taxes elsewhere to make up the deficit. So we don't help ourselves although I suspect we prefer to moan much more than we actually want to help change.
And reading the latest batch of questions in Any Answers tells me there are a lot of cowboys out there who really don't have the professional expertise to work effectively in this field. I am sure "we" are all great but it makes me wonder about the quality of some of the returns that HMRC have to deal with. It's no wonder the service isn't that great if they are getting bogged down with simple mistakes and problems that I would have hoped anyone in our profession might have been able to resolve themselves.
Anonymous ad infinitum
To anonymous poster of Saturday 6.27pm
Yes it is very easy to make simple remarks about a simple tax system, that is because it is simple. Any such laws would need definition, if you think I’m going to start writing laws etc for the sake of argument with “unknown anonymous poster of acc web” then you are mistaken. If a business is not profitable, then it goes bust, that is usually the end for it-this is real life. Of course a flat tax would have to be compulsory, it is half baked to have a voluntary flat tax – you wouldn’t see the benefit in the economy/enterprise if people could opt out. People would start businesses, because of the low tax rate, a rate that would obviously need real analysis to work out.
To anonymous poster of Sunday 12.41pm
If you wish to end a “combative”, as you put it, relationship with HMRC then write to them and ask/persuade them to stop. Or do you work for HMRC? I ask because you appear to think there is something wrong with professional advisers, who are duty bound to act in their clients’ interests, working to legally minimise their clients tax liabilities.
It is not illegal to enter dark alleys, there is therefore nothing wrong in doing so. However, there is something wrong with entering places clearly classified/defined in law as private property. If the alley owner wants to top someone entering they should set laws to build a wall, also put up clear and simple signage….otherwise why did they create the “alley” in the first place!
I don't work for HMRC...
... but I can take a step back and see the bigger picture. And I was clear that there is obviously nothing wrong with helping clients minimising taxes. A more careful inspection of my post shows the I said "dubious" practices and I doubt you are naieve enough to not know what I meant.
But your retort proves my point quite nicely so thanks. Your suggestion of writing to HMRC implies it is "them" and not "us". It would be nice to live in your black and white world but mine is much greyer (literally unfortunately!). I'd rather look at myself first to be honest even if it would be much easier to place 100% of the blame elsewhere. We don't always help ourselves. While you take your attitude then nothing will change.
Dear anonymous of 1.53pm
Firstly, please get a name for the forum, it would make you sound human. “Dave”, “Gordon”, “St.George” or even a third “David Winch” would be fine, obviously the latter must be like New York, so good his name’s already been used twice.
Am touchy on definitions of tax avoidance and tax evasion, the former increasing under attack for what are, really just politically opportunistic reasons. If we don’t abide by the actual law, and protect it, then we have chaos. A government that bangs drums about, and tries to extract blood from the “stone” that is, the continuously changing difference between tax evasion/avoidance is in reality just banging its head against a brick wall. I am a little taken aback at you using the term “combative” but then complain about my use of the word “them” in respect of HMRC. I note your previous post mentions “For every dubious way of avoiding the 50% tax rate,” and then goes on to admit “we'll just see more legislation and ultimately higher taxes elsewhere” which surely proves that the “dubious ways” you’re thinking about are quite legal because they are only countered by changing the law. Is there not a flaw in your logic?You appear to justify avoiding utilisation of existing law to save clients from unnecessary taxes by suggesting the government would just raise other taxes … “ultimately higher taxes elsewhere to make up the deficit”.
Deliberately misunderstanding?
Are you deliberately misrepresenting what I post? My position is, I think, very clear but you're trying to suggest I don't believe in minimising taxes for clients in order to make youer argument. Minimising tax is completely different to engaging in avoidance schemes that quite clearly are designed to reduce taxes artificially. If you can't understand the difference then we really have little hope.
And I'm not alone here either. Have you read recent articles by Mark Lee and Mike Truman? Try reading a few posts on Mark's blog at http://ow.ly/vUhw and to quote him from 16th October: "Before today I felt almost like a lone voice in the tax profession. Now within 24 hours we have a senior tax partner at one of the largest firms of accountants in the country and also the Editor of the leading weekly tax publication in the country, both commenting publicly that some tax schemes are indefensible even if technically legal. The tax world is indeed moving quickly. Hold on tight. It'll be a rocky ride! "
I subscribe to that view and I just think it is hypocritical to complain about the system we all have to cope with when our actions are partly contributing to it. I've read nothing in any of your posts that acknowledges that and recognises the points that Mark makes (more eloquently than me naturally).
same old same old
Unfortunately its the same old story.
When will some people realise. You cannot have an artificial or an aggressive tax avoidance scheme.
Perhaps the new £15 compensation donation on top of parking fines might be considered an artificial tax on naughty people!!!!!!!!!!!!!!!!!!!
What do you think Simon????????????????
The problem with our tax system is that it is based on politics and not commerce. Tories say we should do this. Labour say we should do that and the others say something else. The only common denominator is politics.
So where do we go from here????????
There is an opportunity early this year for a bright spark to take the bull by the horns, alter our tax system and win the next general election.
So what will happen - huff and puff - with a hung parliament.
To Anonymous III – The return of the Trevor, hopefully tomorrow
I’m not misrepresenting your post, I’m simply picking up on the inconsistent “logic”. I see that you did not explain the disparities. Tax avoidance isn’t illegal and it is the duty of any accountant to know/advise of such for the benefit of their clients. End of story.
Reducing taxes “artificially” is legal, organised, approved of, and encouraged by HM Government, and citizens/bodies use their legal right to take advantage of the Government methods as well as those thought up by others. If a method of saving tax is legal then it is defensible, to know of such methods and yet avoid advising a client of such is unprofessional and could get you sued…probably not with Bob who has the corner shop, but it will with ABC Plc/Ltd who work at a higher level and are guaranteed to have people from around the world bidding for their business!
My actions are not contributing to any illegal tax evasion and like other accountants, I abide by the law. If you have information about one not abiding by the law then report him/her/them. I expect HMRC to comply with the law, especially the bit about as a public body having a positive duty to protect the rights of individuals, and comply with the civil service code etc etc. Nothing wrong in those expectations and yet the reality is!!!
Your posts contain views about how the profession should basically change its attitude to HMRC but then you quote Mark Lee, someone who (according to his link, included within your post) partly gave up the practical side of the profession due to “HMRC's growing powers but lack of adequate safeguards for taxpayers” and “Unjustifiable complications caused by HMRC doublespeak” as per his article in Taxation 2.7.08. I can understand why a politically motivated HMRC would take a tough line with promoters of certain legal tax saving methods, but I don’t understand why HMRC would take such a tough line with the everyday Jones’s who were “guilty” of nothing but simple/well known/legal tax planning. Perhaps you could explain how Mr Lee’s “HMRC's growing powers but lack of adequate safeguards for taxpayers” and “Unjustifiable complications caused by HMRC doublespeak” would make you change your own approach to HMRC/”them”, especially with regard to their “in a huff, grumbling/mumbling, off home with their cricket bat” approach to Arctic Systems/Settlements.
The trouble is
that not many accountants see the spectrum of tax advice that is available to their clients - there is often not one single course of action but a number of choices. For my clients (and it is only to them I am answerable and not anyone on here) I combine an understanding of tax law with my own views - which are clearly stated as my views - of the best course of action.
I do not accept that intelligent people cannot discriminate between artificial avoidance schemes, where transactions are entered into purely for the tax outcomes, and good sound business sense which recognises the various tax implications of a planned course of action. Many however choose not to understand the difference and claim that they are "bound" to offer this advice. There are all sorts of tax advisers in this world - you don't have to answer to me and I don't have to answer to you. I will be clear I think that artificial tax avoidance is wrong. That does not disqualify me from acting as agent provided I give my clients the opportunity to go elsewhere for advice by pointing out that "other accountants might give different advice". Then it is up to them.
For the rest of my two pennyworth, I agree wholeheartedly with the "Anon" (yes, please do get a name so that we can talk properly to you) that there is quite a surfeit of "them" and "us", and sometimes I feel embarrassed by the behaviour of other members of my profession. Ultimately they do us no credit - and the same amount of tax still has to be paid - the implication is that of course it will be borne by "someone else". So how does that work?
Artificial??????????
Sorry Rebecca but artificial tax avoidance does not exist. It is a made up group of words. You can have complex tax avoidance schemes but unless you are trying to save loads of tax they are probably not worth setting up.
So what are we left with - that age old "putting the wife on the books". If the wife doesn't work in the business then surely this is "tax evasion"?
The point I am trying to make is that HMRC have the power to combat "tax evasion" however they choose to try to manipulate the Accounting bodies into sorting out the mess HMRC have created over the years.
I do not see any grey areas between "Tax avoidance" and "Tax evasion". In fact I would say that mostly Tax avoidance is practiced by Accountants and tax evasion is practiced by tax payers.
Editorial from TaxationWeb
"Inventors of tax avoidance schemes never cease to amaze me. They are an enterprising and innovative breed. Unfortunately, tax avoidance sometimes exceeds the boundaries of acceptability. I partly attribute the complexity of our tax system to such schemes. Anti-avoidance rules are needed to close loopholes in the tax legislation when they are exploited, which often gives rise to further loopholes and more anti-avoidance provisions...on and on it goes.
Unfortunately, sometimes avoidance schemes are offensive, crude or downright ugly.
Just before Christmas, the Government announced that it was introducing legislation with immediate effect to counter a tax avoidance scheme that abused tax reliefs available for donations to charity. The scheme exploited the tax relief for donations of listed shares and certain other assets to charity. To make matters worse, the Ministerial Statement outlining the avoidance scheme states: "The benefit to the charity is less than half of one percent of the value of the tax relief obtained."
I don't know who is worse; those who invent such offensive avoidance schemes or the taxpayers who create the demand for them. Either way, it is good riddance to this particular scheme...perhaps until someone can find another loophole to exploit."
Says it all.
change the system
You have to ask yourself the question "why are some tax payers going to such lengths to avoid paying tax"?
Are they greedy or just plain fed up with a system that successive governments have abused?
Getting rid of a particular government will not solve the issue so in order to highlight the failings of the present system tax avoidance thrives, and so it should.
Why should you have to pay tax (sorry nic) on employing someone?
Why should you have to pay tax on making money on an investment?
Why should you have to pay tax when you're dead? etc. etc.etc.
When a politician has the guts to say "this stinks lets change it" then you will see a drastic downturn in tax avoidance schemes and the government would probably get more income.
Until that time comes I see no reason why the unfair tax system shouldn't be clobbered as much and as often as possible legally.
Greedy Governments
If someone is really claiming that legislation is being introduced to close supposed “loopholes” perhaps they would please explain how these came about. In regard to this thread subject, it doesn’t matter what the particular legislation is about, what matters is why the legislation is required. By virtue of the legislators having to “close” a “loophole” in their original legislation, by default they obviously admit their original law was deficient at least to the extent a “loophole” is corrected, they admit they themselves were originally deficient and when these deficiencies continue they either have to admit incompetence or that the law overall is so complex that they can’t manage it. A simplified tax system would create less laws, but as long as there are "greedy" persons in government who can’t stand the idea of people earning and keeping their own money there will be a “need” to introduce ever more laws to take an ever increasing share of that money. A greedy government is the problem.
No taxpayer can be challenged for wishing to legally save unnecessary taxes (their money), it is an entirely legitimate ambition and certainly not an indication of greed, and many persons and organisations have a positive legal duty to legally save as much tax as possible for their clients. HMRC should be protecting that right to avoid uneccesary taxes because they have a positive duty to protect a taxpayer's rights.