Tax Evasion - Denial Is Dangerous
Judging by the responses to recent columns addressing the government's attacks on tax evaders, many advisers do not seem willing to acknowledge the problem.
As we know from fictional dramas, the best way to overcome a weakness is to recognise it. Whether this is alcohol, Class A drugs or merely enjoyment of rich food, denial of addiction is almost always the prelude to a disaster.
In last week's column it seemed sensible to try and distinguish between various different types of tax mitigation activity.
Arranging one's tax affairs in the most effective manner is both legal and commendable. For example, the writer has a national savings account that pays interest gross. Few readers are likely to regard this as unacceptable behaviour.
Tax avoidance somehow sounds a little more sinister following unwarranted attacks from all and sundry, though it should not. This is perfectly legal as a matter of principle so what is the issue?
Things get a little more interesting when we address those new terms created by Mr Osborne and his friends, aggressive and abusive tax avoidance. They should still be legal, if on occasion they might leave a bad taste in the mouth.
However, as we keep hearing, morality has nothing to do with taxation and certainly many practitioners take the view that if the legislators are stupid enough to create loopholes in the law that allow the very rich to pay less tax than they should it is a positive obligation to take advantage until the law is changed.
The position has become more confused with recent court decisions, such as PA Holdings, that have apparently overridden the strict wording of the law in favour of a more purposive interpretation of the intentions of the lawmakers.
Up to this point, it is unlikely that many readers will have taken issue with the analysis of the current state of affairs. Where there appears to be a more serious dichotomy is between the man on the Clapham omnibus who sees all tax mitigation as an affront and those who do not appear to accept that tax evasion exists at all.
Last week's article looked at yet another impending attack on those who choose to evade tax. To take a simple example, one might look at somebody who has made a significant profit from a transaction in the UK some years ago, perhaps the sale of an investment property, and put the proceeds into an anonymous bank account in, for example, Lichtenstein. From that day to this, they have declared no tax in the UK or anywhere else on either the sale proceeds or the interest received each year.
Those of us that work in larger firms of accountants have investigation departments that assist those who get into exactly this kind of pickle and are either troubled by their consciences, inherit a problem from a deceased relative or get found out by HMRC and don't fancy a spell in jail.
The strange thing is that every time an article gets written about tax evasion, there appears to be a stream of correspondents eager to explain that it is perfectly legal to use every loophole written into the law.
What they fail to address is the fact that this country loses billions of pounds every year in tax revenues as a result of illegal activities similar to that described above and in many cases, very much worse.
It is time that we all make every effort to throw opprobrium on these fraudsters and, in this way, distinguish between their activities and those who are utilising perfectly valid avoidance techniques, accepting that there could be different definitions of what is within the law.
If we do not, there is a severe risk that both the accountancy and legal professions will begin to get tarred with the same brush as Members of Parliament, diving footballers and pickpockets.