It's well known in economics that low taxation boosts the economy (and boosts long term tax revenues) and vice-versa … it's also well known that as tax rates lower so does avoidance and evasion. According to the Adam Smith Institute the effective (real) rate of UK tax in 2017 was 44.65% (including indirect taxes and duties)
This is a ridiculously excessive rate that both encourages people to seek a fair rate (avoidance) and damages the economy. If the politicians really want to get rid of avoidance and to help remove poverty then they should start reducing tax rather than demonising those people who take steps to lower their excessive tax bills
Ian - the remains that roughly 95-98p of every £1 paid in income tax is wasted, and hence pointless. You are right that schemes relying on loopholes and barristers opinions are high risk, but there are other ways to considerable reduce a businesses tax burden without relying on such schemes. We have been designing business structures that reduce/remove tax for clients for over 20 years (e.g mini "googles")… admittedly we are specialists in international tax, knowledge that many accountants do not have to hand, but telling a client to be happy paying more tax would, to us, be an admittance of failure.
I agree that people who rely on dubious tax loopholes to avoid tax are mugs, but then so is everyone who does not try to reduce our excessive taxes. In 2015 HMRC reported that legal tax avoidance was worth 2.7bn… in 2013 after analysing government expenditure the tax payers alliance concluded that the Government was guilty of needlessly wasting 120bn per year (98% of income tax receipts).
Tax avoidance does not impose any burden on taxpayers, the burden comes from the financial incompetence of the government
The aim is obviously to ensure the growing business does so in such a way as to generate higher levels of tax since most sensible large companies will seek help from firms like mine to structure themselves to pay less tax (fairly easy to do) or even no tax at all (still not that difficult)
Quote: 'Based on HMRC’s approach to other taxes, it will continue to make this data available via the entity’s Digital Tax Account. Businesses will need to go through a two-step verification process to access the data, thereby preventing access by third parties such as accountants.'
As usual, try and push the accountants out of the way because they are the ones who identify 97% of HMRC errors and they (most of them) don't roll over and let HMRC bully them into submission
Rather than concentrating on tax rates the government (and pressure groups) should concentrate on reducing government waste and ensuring all government spending gives the best value for money possible. A study a few years ago suggested that government waste (just waste, not poor financial management) accounted for some £40bn or ten times higher than the estimate for tax avoidance at that time. Factor in poor value for money etc and that figure could be double. Even with reduced spending (austerity) the amount of money wasted by the government comes out at around 30% of tax collected (Income & corporation tax for 2014 = £207bn). If government spends wisely and carefully there is no reason whatsoever to increase tax … increasing tax is simply throwing good money after bad, a totally pointless exercise.
HMRC are not corrupt, but their incompetence and over the top heavy-handedness in dealing with mistakes (often their own) does mean that as a business they would be out of business within a month because no-one in their right mind would deal with them if they were not forced to
Seems like a 10,000% ROI to me - a few million's in cost to get many billions in savings each year… well worth it.
What the chancellor needs to do is to stimulate the small business sector, as this is where the majority of local economic growth comes from. The money firms save from tax reductions (small businesses) tend to be spent on business growth and within the UK. this means that the tax revenues benefit from - Increased indirect taxes, Increased paye taxes (from extra employment) increased corporation taxes (extra business = extra profits to tax) and finally from a reduction in state benefits bill (lower unemployment). This does not happen with tax cuts for big businesses as they grow slower and the large part of dividends tend to go to international and corporate investors. If I were chancellor I would look at - cutting employers NIC to 10% (with no cap) - Increasing the NIC threshold to match the personal allowance, cutting the rate to 10% without a cap - making corporation tax banded (as per Income tax) and having the following bands:- 0 - 10k 0%, 10k -500k 15%, 500k-1bn+ 20% and above 1bn at 25%. I would also remove the dividend tax, counting dividend income in with income for income tax, but retaining the allowance… but for small business shareholders who own 25%+ of the shares the dividend allowance would increase to £12k. This would boost small businesses, not discourage big businesses from investing, and limit the loss of tax income whilst the economy is settling down
When embarrassed… change the rules!
Its well known that most people end up paying more tax than they need to if they do it all themselves… we have also all come across stupid mistakes made by HMRC that they will refuse to acknowledge as far as possible. It should therefore come as no surprise that they are marginalising tax agents.
It is win win for HMRC as they get rid of the people who pick up on their incompetence and at the same time increase the tax take by pushing more work and complexity on those who do not have the knowledge to work out that they are paying too much tax.
The playing field is changing and HMRC are making the rules up as they go along. This means that smaller practices need to start planning for a new business model that will be adaptable to HMRC's anti agent bias. My firm has already started moving away from direct tax work and onto strategic consultancy which has the benefit of directly increasing clients bottom lines (including some accountancy firm clients) whilst reducing our interaction with the increasingly uncommunicative and unfriendly taxman… more money for our clients, less stress for us and bigger fees as well!