Reply to: Even more powers for HMRC

[yasockie]

On the face of it sounds simple.

Politicians talk about extracting £xBn from tax avoiders as though the money is just sat around in suitcases under people's beds doing nothing productive.

In reality, it ain't that simple.

Glad someone raised it.
The main thing keeping me here is $$$. And drinking on Mondays.

[Boobetty]

The other laughable thing is that avoidance only represents a small fraction of the total tax gap.

See pie chart on page 13.

https://www.gov.uk/government/upload...e_20141014.pdf

The most laughable thing about this document is that not a single penny of the tax gap has been attributed to HMRC error despite the well publicised problems. And these are just the things we know about - I shudder to think about the things that have been covered up.

Virtually every tax payer has experienced the breathtaking incompetence within HMRC, and the national press enjoy a good poke every so often, yet HMRC don't appear anywhere on the pie chart. Astounding.

[StrengthInNumbers]

Take it to the logical conclusion.

There are no tax reliefs, personal or corporate and instead turnover is taxed at 5% flat rate.

No very progressive of course so perhaps a couple of bands.

how long before you think people/companies will find ways to manipulate the turnover?

Once that greed/need demon is loose, all reason and logic is a victim.

Only if they keep it complicated.
1) limited company can only be paid into bank account.
2) whatever gets paid in - pay 25% as tax and go home with whatever left.
Keep it simple and stupid and it will work.

[webberg]

Something like this will be sooooo gooood but then what will happen to 100s of jobs at HMRC? Let's keep it complicated and armies employed

Take it to the logical conclusion.

There are no tax reliefs, personal or corporate and instead turnover is taxed at 5% flat rate.

No very progressive of course so perhaps a couple of bands.

how long before you think people/companies will find ways to manipulate the turnover?

Once that greed/need demon is loose, all reason and logic is a victim.

[StrengthInNumbers]

They should create a new type of limited company for contractors /one person. Which pays say 25% profit tax and can claim limited expenses. The rest is paid as salary tax free.

Something like this will be sooooo gooood but then what will happen to 100s of jobs at HMRC? Let's keep it complicated and armies employed

[flamel]

No but the politicians and HMRC have been very successful in blurring the lines between avoidance and evasion.

They are only doing this to win votes without understanding it at all as was seen when they were "debating" and then introducing all of this guff last year

[Unix]

They should create a new type of limited company for contractors /one person. Which pays say 25% profit tax and can claim limited expenses. The rest is paid as salary tax free.

[NotAllThere]

....
The next obvious was, if you prevent thousands of well paid people from earning those salaries and instead they go on to welfare because they can't work in financial services, in a year/2 years there is a huge hole in the economy and tax receipts. The answer is that this is a problem for HMT...

This is only the case if a significant proportion of contractors in the financial sector were money grabbing tax avoiding sociopaths careful tax planners. If it's a small minority, then the shortfall will easily be absorbed - it might even cause rates to rise if supply is constricted for a while.

[webberg]

That is interesting!so it's only the second highest (and only just). And are they now saying that tax avoidance is the same as evasion in being illegal by pushing this through?

No but the politicians and HMRC have been very successful in blurring the lines between avoidance and evasion.

[webberg]

And should we all include ISAs as tax avoidance? Let's throw the kitchen sink at it and be done with it now.

Well I can point you to articles I've written or contributed to that say EIS/SEIS is the next big problem.

Billions have gone into these schemes since 93/94 and (in my opinion) many of them, if properly understood, never qualified or will fail to qualify in the future. Given that these carry a tax relief of between 30% and 20%, depending on when done, I reckon perhaps £2.5bn to £3bn of tax relief has been granted.

Let's say 20% of these are potential problems of which 50% are shown to be "ineligible". (I would say those values are generous).

That's close on £300m of tax relief granted without proper checks or consideration and which is (in my opinion) potentially able to be clawed back FROM THE INVESTORS.

Scary.

https://www.gov.uk/government/upload..._Dec_14_V3.pdf

[ads1980]

And should we all include ISAs as tax avoidance? Let's throw the kitchen sink at it and be done with it now.

[ads1980]

The other laughable thing is that avoidance only represents a small fraction of the total tax gap.

See pie chart on page 13.

https://www.gov.uk/government/upload...e_20141014.pdf

That is interesting!so it's only the second highest (and only just). And are they now saying that tax avoidance is the same as evasion in being illegal by pushing this through?

[webberg]

The other laughable thing is that avoidance only represents a small fraction of the total tax gap.

See pie chart on page 13.

https://www.gov.uk/government/upload...e_20141014.pdf

Absolutely.

Look at the "informal economy" values.

Bear this in mind next time you have something done for "cash in hand".

[webberg]

On the face of it sounds simple.

People who avoid tax are pure evil, so let's screw them right into the ground. Seize their assets, take their homes, make them bankrupt etc.

However there is an economic cost to this. Yes it boosts the Treasury's coffers but it takes money out of the economy at the same time. Bankrupting lots of people definitely doesn't make economic sense.

People may quit the UK, and many may say good riddance. But they're taking their spending power with them.

Politicians talk about extracting £xBn from tax avoiders as though the money is just sat around in suitcases under people's beds doing nothing productive.

In reality, it ain't that simple.

The underlying assumption (and I have heard this quoted by HMRC in a meeting) is that if you avoided tax from 3/5/8/12 years ago, you knew it was a risk and have either used the tax saved to acquire an asset that you will have to sell or have the cash.

When it was pointed out that 90% of people would have spent the money and have nothing tangible, HMRC responded that their policy was not formulated on that basis.

The next obvious question was to ask their policy on taking thousands into redundancy. Answer - they don't have a policy that they would share.

The next obvious was, if you prevent thousands of well paid people from earning those salaries and instead they go on to welfare because they can't work in financial services, in a year/2 years there is a huge hole in the economy and tax receipts. The answer is that this is a problem for HMT.

So, everybody in HMRC below grade 7 or 8 (senior Inspectors and above) is holding the official line because they would be fired otherwise.

Everybody in senior posts is scared of their political masters putting the kybosh on their careers and pensions if they step out of line.

It's even difficult to get these people to admit privately that their policy will result in hardship and potential tragedy.

The line is - you did tax avoidance - you knew or should have known the risks - we need the money - pay.

[DonkeyRhubarb]

I think the poiliticians are all beyond thinking that way though. They just see numbers being banded around like £x billion and think it sounds as tempting to take as their expenses!

The other laughable thing is that avoidance only represents a small fraction of the total tax gap.

See pie chart on page 13.

https://www.gov.uk/government/upload...e_20141014.pdf