Jim Armitage: The best way to stop avoidance is to make tax simpler

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On the face of it, you can’t argue with the Treasury’s plan to fine the City banks and accountants who promote tax avoidance strategies. Why shouldn’t the facilitators of these dodgy schemes pony up some of the bill for their client?

The Treasury’s idea is that any firm involved in designing, selling or marketing a tax avoidance scheme ruled illegal by the courts could be fined up to 100% of the tax that was underpaid.

The problem is, the legality or otherwise of these schemes is hardly ever cut and dried.

There’s rarely an instance where the plan is totally against the spirit of the tax code — that’s why they spend years grinding through the courts, with one judge declaring them lawful and another ruling against on appeal.

And the reason it’s not cut and dried? Our tax system makes the rules of the Olympic keirin look simple. The tax code, now clocking in at 10 million words, is 12 times the length of the King James Bible and twice as long as it was in 2009.

It includes so many contradictions that advisers will inevitably misinterpret it regularly. In most cases, this will not be with “aggressive” avoidance in mind.

As such, where so much is down to finely balanced judgments, the courts will have to think extremely hard before levying punitive fines on the advisers. We don’t want tax tribunals to turn into witchhunts.

Having said all that, where there is clearly flagrant abuse going on, of course it is right that the advisers should be forced to face the consequences. 

Like the underworld armourer who supplies the shotgun, advisers pushing lethal tax weapons should be held liable for facilitating and encouraging the unlawful actions of the customer.

As long as the fines proposed by the Treasury today are levied carefully by the judges, in only the most outrageous cases of abuse, they should make the advisers think twice. 

Furthermore, it should make their professional indemnity insurers wary of offering cover to any but the most conservative firms.

A useful stopgap, then, while the government gets to grips with the real issue: making tax simpler in the first place.

EU does us a service

Some divisive figures in today’s jobs data: the number of non-British EU citizens working here rose by 238,000 to 2.2 million over the past year. That rise is equivalent to a city the size of Derby.

Whether you think that shows how vital EU immigration is to the British economy, or see it as a threat to UK jobs and wages, one thing’s certain: if Brexit puts the brakes on incomers, there’ll be massive upheaval for employers to fill the gap. 

I take the former view, by the way.

Today’s figures show there are 741,000 unfilled job vacancies; close to record highs. Most are in service sector roles Brits won’t do. Where’s the harm in filling them with capable Europeans?

Source Article from http://www.standard.co.uk/business/jim-armitage-the-best-way-to-stop-avoidance-is-to-make-tax-simpler-a3322756.html

August 17, 2016 |
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