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AIA

TAX OPINION: Avoidance - all in a knight's work. By Simon Sweetman

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26th Jun 2006
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Here's a simple question. What is the government's attitude to tax avoidance?

If we listen to Treasury ministers it is very clear that they don't like it, and that dislike frequently extends even to quite mundane and small scale examples.

So what are we to make ' in particular ' of the knighthood bestowed upon Philip Green in the Birthday Honours list?
First we need to agree on some basic facts. We can assume that it is a polite fiction that it is the sovereign who makes the decisions and that the executive arm of the government has nothing to do with it. One can suppose that these arrangements have survives from the feudal system out of simple inertia, or even (heaven forbid!) because Prime Ministers find it useful, but in my innocence I have assumed that the point of the honours system is 'pour encourager les autres', and to suggest to them that if they put in similar efforts they too may be rewarded. This appears to be either manifestly absurd or rather offensive: if someone accepts an OBE for their charitable work, does it follow that this is why they did it in the first place?

Then there is a whole other argument about whether it makes sense for somebody to be honoured for doing their day job, for instance, with honours for relatively junior civil servants being apparently distributed more or less randomly, again on the basis that someone is more likely to put in a full day's work if they might get a gong at the end of it.

Services to business, or to the UK economy, are yet another can of worms. One must assume ' indeed it seems to be essential to all theories about free market economics ' that persons in business must be driven by the quest for personal gain. Free market theory then perhaps goes on to suggest that their activities may benefit others, even though that cannot be the motivation. If England were to win the World Cup (still theoretically possible at the time of writing) then David Beckham will undoubtedly be knighted (because of the need to show that the government is in touch with the people and so that this ranks above the Rugby World Cup or the Ashes). Sven will presumably miss out because of his premature disappearance from the scene. Presumably the underlying theory to this is that his efforts will have enhanced England or UK PLC as a brand, so leading to increased exports/GDP/human happiness or whatever.

But what is the main thing we know about Mr Green? We know that his company, Arcadia Group, paid out the largest dividend to an individual in UK financial history, that this was ultimately paid to Mrs Green (by way of a complex chain of companies, some of them offshore) and that because she is resident in Monaco no UK tax was paid on some £1.2 billion, apparently 'saving' £285 million. Undeniably this is the result of tax planning. It is therefore appropriate to ask, if the actions of Mr and Mrs Jones of Arctic Systems Ltd was tax avoidance, which was clearly what Treasury ministers believe, does the same apply to the actions of Mr and Mrs Green - only multiplied by a factor of about 20,000.

So if the honours system is about affecting the behaviour of those who see how they are distributed, and making them work harder for the good of the nation, what can we make of Mr Green's knighthood? It must be, at the very least, that massive and well publicised tax avoidance is no bar to honours. So it seems that the government doesn't have anything against tax avoidance after all, as long as it's the rich wot does it.

Are you listening, Gordon Brown?

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By abelljms
28th Jun 2006 18:09

is it a duck?
Someone once said “if it looks like a duck, walks like d. and sounds like a d. , it is a duck”.

It is easy to state without fear of any contradiction/writs that Phillip Green of Arcadia is engaged in massive tax avoidance, which at present is not illegal, merely totally immoral.

I do find it surprising that a transaction of £1.2bn. can escape the tax net without being caught by Gordon’s “dodgy tax scheme” registration system.

This sad event merely highlights how everyone regards it as fair game to only pay the amount of tax THEY think is OK, rather than our esteemed governments’ idea of what’s fair.

Unfortunately I estimate most will pay about 20-25%, whereas the government demands 33-41%, so the gap is around 15% ?

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By AnonymousUser
28th Jun 2006 19:16

moaning??????????????
Simon, its no good moaning about tax payers who are clever enough to set their affairs so that they pay the minimum tax possible within the legal system.
Instead you and all the other moaners should get your heads together and come up with a collection system to pay for what our government of the day needs to run this country which is fair and doesn't lend itself to abuse.
The present system is unmanageable and the more you tinker with it the more it will lend itself to abuse.
If all the brains in this country cannot come up with such a system then we must be in a very sorry state.
Here's just one idea. A body seperate to the government run the finances. This will have the effect of the system of money collection not being political.
Come on you moaners lets have some really original suggestions.

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By Simon Sweetman
28th Jun 2006 16:15

tax avoidance
If setting up an elaborate and costly structure of interlocking comapnise and trusts, including two Channel Islands companies that appear to own each other, all for no apparent reason other than paying less tax, is not tax avoidance, then I don't know what it is.

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By AnonymousUser
26th Jun 2006 18:34

Again !!!!!!!!!!!!!!!!!
How many times do we have to go down this route????????????????
There is no such thing as "TAX AVOIDANCE".
If legislators cannot put into plain English what Parliament want to achieve then they should go back to the drawing board.
When a system becomes unmanageable there is only one solution and that is to start again.
At least then we might get rid of the hypocrosy within the Tax system.

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