TAX AVOIDANCE – BLACK AND WHITE OR SHADES OF GREY

The most recent contribution to the debate came in a typically gruff discussion between John Humphrys and David Cameron himself on BBC’s Today Programme.

However, in a society where having a personal accountant is no longer the domain of the super rich, when does cunning accounting become “aggressive” tax avoidance, and when does this become immoral, let alone illegal?

Amongst those who have received a particularly bad press in recent weeks is Amazon, which is alleged to have avoided taxes on sales of £7.6 billion in the UK, through a registered parent company based in Luxembourg. In the past U2, one of Ireland’s greatest exports, has also received heavy criticism for registering part of their business in Holland, reaching fever pitch with the creation of a website http://www.makebonopaytax.com  and protests at Glastonbury.

So does this constitute abuse? After all, our current tax system has in part been designed to enable certain groups and individuals to pay less tax as a means of promoting entrepreneurship and stimulating economic growth – both critical in these post recession times. Take for instance this year’s Budget statement, where George Osborne announced the Government’s intention to give UK video game producers tax breaks to stem the relocation of the industry to Canada. Or indeed ISAs, where many of us place money for the sole purpose of paying less tax.

Alas, the Government’s proposed solution to the problem has proven no less controversial as plans to cap tax reliefs on charitable donations have sparked outrage across the third sector. As proposals currently stand, from 2013 uncapped tax reliefs – including those on charitable donations – are to be capped at £50,000 or 25% of a person’s income, whichever is higher.

The backlash from these moves has been swift and strong and, once again, the Government has had to take a step back and open the plans to further scrutiny. We shall wait to see how the issue plays out in what has been one of the Government’s most difficult months since coming to power.

* This website has subsequently been taken down