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HMRC Faces Taxing Times

Contributed by Hawksford
31 July, 2013


Contributed by Hawksford [www.hawksford.com]

Geoffrey Shindler, consultant for wealth structuring company Hawksford Group, explains why tax collection is not just about screaming headlines

 

As I see it current tax law is caught in a bizarre pincer movement. One the one hand, the Daily Mail, The Times and, we are led to believe, the majority of tax-paying individuals are all outraged by perfectly legal tax planning arrangements, on the other side of the pincer movement are MPs.

Neither the press, nor the majority of tax-paying individuals, nor the majority of those whom we have elected to Parliament appear to have the slightest regard for the law of this country. It is not the taxpayer’s fault if there are ‘loopholes in the law’. MPs, or so we are told, consider and pass our legislation. All the tax laws are proposed by government and the government either takes instructions from, or at least one assumes is in constant dialogue with, HMRC. A loophole, and that is a very pejorative word to use, is the result of either deliberate drafting so as to exclude certain transactions from subject to tax or incompetent drafting. Either way what is the taxpayer to do?

Most taxpayers regard tax as an expense – indeed what else is it? You may say it is our contribution to civilisation. Yes, that is correct, but civilisation is based on the rule of law and the rule of law is not the whim of tax officials but is the product of considered deliberation by those elected in a parliamentary democracy to consider and, if thought fit, pass legislation. It is quite outrageous for the press, whose object it is to sell more newspapers, or MPs, whose objective it is to be re-elected next time around, and, even worse, members of the government, to talk about morality in taxation. Tax is a matter of law. I never cease to remind my accounting friends that tax is not a matter of accounting but is a matter of black letter law, either parliamentary or judicial. So if you fall within the exemptions set out in the statute, or outside the authority laid down by the courts, why does the media castigate you? 

It seems to me that only the lawyers are those, who, for once, are the shining beacons of civilisation; those who believe that the law, even tax law, is not ‘fairness’ or made by those with the loudest voices. We uphold the law. So lawyers and the rule of law they uphold are the ones caught in the pincer movement. That is a very worrying trend for civilisation. The law is what is decided by Parliament or the judges. It is not what Mr Cameron or Mr Osborne or anyone else, while in a fit of pique, thinks it ought to be or would like it to be. I say to government that if you do not like the law then change it. But when you are changing it beware of the unintended consequences.

I do not propose to get involved in the Starbucks / Google debate but I wonder how much UK VAT is paid by Starbucks during the course of one tax year or how much National Insurance is paid by the employers and employees of the multinationals who are now so unpopular. If you change the taxation basis to one that multinational companies regard as too harsh they will simply decamp elsewhere. So, far from tax planners destroying the tax base of the country, it may well be the government under pressure from the now non-silent majority who does so.

The most important message of all is that the law is not made by banner headlines in the media. Obedience to, and respect for, the law is the very basis of civilisation. Do you really want to live in a country where every time a ‘loophole’ is exposed publicly there is a collection box from HMRC on the doorstep of the relevant company or individual without the need for prior legislation? Nor do companies deciding their own voluntary contributions to the Exchequer make it the law. What sort of example does that set? And if you are a trustee, who holds shares in a company that pays tax voluntarily, do you threaten the directors with a claim for a breach of their fiduciary duty by giving away the assets of the company? And what do beneficiaries do when they find their trustees to have invested in companies where assets are to be given away without legal justification?

Tax collection is a far more complicated and difficult topic than screaming headlines.




 


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