Wednesday, December 21, 2011

BLOG 118


I don’t know the answer to that question. I thought that I did! I see it as when someone enters into artificial transactions that create a tax effect that parliament did not envisage when it enacted the relevant legislation.

Using that definition I do not personally espouse tax avoidance. Nor does Graham Aaronson QC who has recommended that the government introduce a GAAR (General Anti-Avoidance Rules) that is targeted as such transactions. Unlike Graham (I think, from reading his report) I do however recognise that not everyone is opposed to tax avoidance. Accordingly I have no difficulty in informing clients of what is on the market if asked. I think it unprofessional to seek to impose my own moral outlook on clients who may have a different concept of morality than I do.

Indeed I am not sure even that I am opposed to tax avoidance. I feel uneasy about it but think it a consequence of parliament having enacted reams of tax legislation with virtually no debate and having given MPs little or no opportunity to consider its implications. If parliament chooses to treat the citizenry with complete contempt – which is surely the only rational reason for passing laws that MPs do not understand and have, in the main, little or no inclination to try to understand – I have a sneaking sympathy for those who seek to adhere to the constitutional concept that one has to abide by the laws that parliament enacts, not try to guess what laws it would have enacted had it bothered to think about it. Accordingly if parliament chooses to enact legislation that gives rise to unexpected consequences, I find it hard to criticise those who choose to exploit those statutory consequences.

Where ill-considered law imposes tax in situations that no right minded person could conceive that parliament or anyone else could have intended, HMRC tend to shed copious crocodile tears and explain that, whilst they recognise the unfairness, they have a statutory duty to enforce the law that parliament has chosen to enact however unreasonable the result may be and however unlikely it may be that parliament intended to impose tax in such circumstances.

Indeed under the last government I started a petition on the 10 Downing Street website asking the government to give HMRC power to decide not to enforce unfair laws. Sadly, I only garnered a couple of hundred signatures, which was not enough to achieve the change that I wanted.

But I digress. My point is the saying that, “What is sauce for the goose is sauce for the gander”. If HMRC and the government want to enforce unfair laws against taxpayers, I find it hard to criticise taxpayers who similarly seek to enforce laws that most of us consider unfair to the general body of taxpayers. I think that tax either ought to embody a concept of fairness or fairness ought to be irrelevant. A concept that the law should somehow be unfair in its application to taxpayers but fair in its application to the State is anathema to me.

But I should get back to my initial question. This was prompted by a recent article in The Times headed, “Stamp Duty”: Only the best will do for the super-rich, especially if you don’t have to pay tax”. Actually I don’t think it was about stamp duty at all. It was about stamp duty land tax. However, whilst I regarded The Times as a newspaper of record under Lord Thomson’s ownership, I no longer expect it to be unduly concerned about getting facts right.

The thrust of the double page spread devoted to this “story” was that if someone buys shares in a company that owns a property, one pays whatever tax parliament feels it appropriate to impose on a transfer of shares, not the tax that it feels appropriate to impose on a transfer of property. I do not myself find it odd that different transactions should have different tax consequences. Nor do I consider that I am avoiding tax if I choose to enter into transaction A whereas I would have paid more tax had I chosen to enter into transaction B, which has different tax consequences.

For example am I avoiding VAT when I buy my zero-rated lamb chop my zero-rated cauliflower and my zero-rated carrots and cook them at home paying only 5% VAT on my gas usage, whereas if I had chosen to eat out I would have had to pay 20% VAT on the entire cost of my meal? If so, I am one of those hated tax avoiders, because I eat in a lot more than I eat out.

If I am not a tax avoider, why should someone who buys shares in a company that owns a property be a tax avoider because a purchase of shares attracts stamp duty of 0.5% (or is exempt from stamp duty in the case of a non-UK company) whereas a purchase of a property attracts tax at up to 5%? Is there really a difference between parliament having chosen to tax meals I cook myself differently from meals I eat at a restaurant and parliament having chose to tax purchases of shares differently from purchases of property? I freely confess that I cannot see one. Yet if The Times feels that it should devote two pages to castigating those who choose to buy shares, why does it not equally castigate those who choose to cook at home rather than eat out and pay VAT? It surely cannot be simply because The Times itself encourages such VAT avoidance by printing cookery recipes at the weekend!

All that I can think of is that tax avoidance is not about tax at all; it is about envy. We, or perhaps, to be precise, Times journalists, are motivated more by jealously than by morality. It is not so much about avoiding tax as about the rich being able to “avoid” tax in ways that journalists cannot afford to do.



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