Thursday, 20 December 2018 14:03

Acceptable tax avoidance: a new concept


It seems that a new, unpleasant concept has just appeared for the British: “acceptable tax avoidance”. This was made known during the presentation of the United Kingdom’s Budget, which occurred in March of this year before Parliament. Special emphasis was made in this document on calls for “strategies against evasion.”
Experts consider tax evasion as an unacceptable criminal offence; however, they have shown an enormous preoccupation because the British also consider tax avoidance as wrong. According to this country’s politicians “avoidance is not the same thing as tax planning”; without a doubt, analysts feel that both tax avoidance and planning are legal methods for reaching the same objective; relieving the tax burden.
Apparently, Prime Minister David Cameron’s government wants to create two separate concepts: “acceptable tax planning”, meaning an investment that is efficient from a fiscal point of view, and an “unacceptable tax planning”, which, presumably, is something else that the authorities don’t like.
Another worrisome point, besides the suggestion in the budget, is the increase in actions by the British tax authorities to collect data on tax evasions. This is done through a new IT system called “Connect”, which will, according to an official report, “look at more than a billion data, collected from intelligence analyses that show true income levels and earnings of those persons identified as evading tax payment.”
A third strategy for the British treasury officials is promoting the signing of new information exchange treaties with other jurisdictions, so as to collect even more information on “evaders”. The United Kingdom has already obtained agreements with Switzerland and Liechtenstein so that these banking giants offer specific details on deposits belonging to British residents; in addition, the Isle of Man, Guernsey and Jersey also signed exchange agreements not long ago. The worst is that, in the future, the arrival of new treaties is foreseeable. The message that the authorities are sending out is very clear: it doesn’t matter where you hide your money, we will find it.
For a long time there was a heavy line between tax avoidance and tax evasion. Now, the experts assure us that another, slippery line has been created between acceptable and unacceptable tax avoidance. With the intention of politicizing this line, citizens are subjected to examinations that are more and more invasive of their privacy.
Parallel to these changes in attitude regarding tax avoidance, there is a growing intolerance towards wealth and the people that create it. For example, the highest taxes in the world are paid in Western Europe, even in the United Kingdom where, this year in April, a reduction was made from 50% to 45%, once they added contributions for national security and stamp fees, the VAT, as well as local taxes.
The new British laws are counter-productive. Experts feel that if taxes and administrative difficulties are increased, then the wealthiest will move their capital toward some other site. In the midst of this enormous network of bilateral and multilateral agreement, it is foreseeable that with more and more frequency peoples’ data will fall into the hands of governmental officials and that, by means of these treaties, this information ends up in another government. The concept of privacy is disappearing and above all, it’s not strange that the richest—5% of this type of contributors pay the highest taxes in the United Kingdom—try to avoid some taxes by hiring lawyers specialized in tax matters.

Published in Tax Planning