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TAKE THAT TAX AVOIDANCE SCANDAL!

By Rob Jupp

Gary Barlow ‘give back your OBE’ demands Margaret Hodge!

We’ve seen some fantastic news headlines this week, as the celebrity angle of the tax avoidance case makes the whole thing that much juicier for the media.

It was Jimmy Carr that was on the receiving end of the last lot of outrage from the powers that be – ‘morally wrong’ according to David Cameron at the time, creating a nice overlap between the financial pages and the celebrity pages of the tabloids.

The whole idea of paying tax seems to be regarded as a very good thing for other people to do, but not necessarily something that one would do if it could be avoided at all.

For the majority of people on a PAYE income there is no real way to offset the tax that has to be paid. However, I assume that everyone reading this blog that is self-employed will speak to their accountant or tax adviser to look at whatever legal means exist to reduce the amount of tax that has to be paid.

This is seen as a perfectly normal and respectable thing to do – so no moral issues here to worry about.

In general terms the more income that is being generated by an individual or company, the more scope and effort that will go into reducing the tax burden. So, where does the moral attitude of society set its gauge on these cases?

If it is a legal mechanism that is being used to avoid tax, isn’t the moral issue with the law makers? If they cannot frame the necessary legislation correctly, why should they expect people to voluntarily pay tax unnecessarily?

Or is the moral outrage based more on the perception of the wealthy enjoying more loopholes than ‘ordinary’ people? It is easy to see why it grates on normal tax payers that very wealthy individuals are paying a lower overall rate than they are, but does that make it a moral issue? Or is it simply envy that fuels the feelings of unfairness?

If you go even further up the financial scale, you get to the large multi-nationals and then the ability to mitigate tax goes to a whole other level. Various companies have been highlighted in recent months for paying very low rates of tax and the most recent of which was Amazon UK. In a piece from Friday’s Guardian, it was stated that Amazon sold £4.3 billion of goods and paid just £4.2 million in tax. The reason for this is that the UK operation provides logistical services, but the sales revenue is all taken by the Luxembourg based company Amazon EU S.à.r.l.

In various guises, this is the method of choice for multinationals to move revenue around jurisdictions to minimise their tax burden. The spotlight has fallen on Vodafone and Starbucks in recent months and public pressure has brought about a certain change in attitude, but the bottom line is that nobody wants to pay more than their minimum legal tax requirement.