Quote of the day 27th June 2015
"It is so riddled with loopholes and exemptions that those who can afford to find them will be able to. It's time for a radical simplification ... to make the line between 'avoidance' and 'evasion' more obvious, and with fairer and lower taxes across the board."
(Jonathan Isaby, Chief Executive of the Taxpayers' alliance, on the tax system.)
He was speaking following the publication of Amazon's 2014 tax returns. The quote seemed apposite again this week following the news just released this week that Amazon reported just £34 million of profit in the UK and therefore paid £11.9 million in tax against UK revenues of £5.3 billion last year.
To be clear about what concerns me on this. If Amazon really only made £34 million profit on £5.3 billion of UK revenue then the shareholders of Amazon should fire their managers for incompetence. If their true profit on UK operations was, as I think far more likely, between four and ten times larger than that, then there is a problem with our Tax system, exactly as Jonathan Isaby says. and the government should urgently act on his advice.
(Jonathan Isaby, Chief Executive of the Taxpayers' alliance, on the tax system.)
He was speaking following the publication of Amazon's 2014 tax returns. The quote seemed apposite again this week following the news just released this week that Amazon reported just £34 million of profit in the UK and therefore paid £11.9 million in tax against UK revenues of £5.3 billion last year.
To be clear about what concerns me on this. If Amazon really only made £34 million profit on £5.3 billion of UK revenue then the shareholders of Amazon should fire their managers for incompetence. If their true profit on UK operations was, as I think far more likely, between four and ten times larger than that, then there is a problem with our Tax system, exactly as Jonathan Isaby says. and the government should urgently act on his advice.
Comments
you are right, the entire tax system needs to be simplified, so we dont have things like Income tax, then another income tax exept its called national insurance, then other taxes depending on what you are buying, Plus VAT on top of that.
instead a simple system would be for every £1 you pay X pence in tax. then thats it. there is no need to go for business, all people in business are paid, so you tax the pay, there is no need to tax the business.
That would be a good tax system. Its open, its honest, and its transparent, people know immediately how much tax they are paying.
Thats why governments dont like it, and why they make the tax system so muddy that people cant see that, but as a side effect it allows for tax avoidance.
Though agressive tax avoidance is a bit like "aggressively sticking to the speed limits" - there is not a problem with it.
You want to curb tax avoidance, fine, simplify the system and reduce the tax rates.
But just as telling a lie is not always illegal but is usually morally wrong, legally minimising your tax liability can take several forms, some of which are entirely acceptable but some of which are dubious.
Taking advantage of an exception which parliament deliberately wrote into a tax code is perfectly legitimate. Parliament may or may not have been stupid to pass that rule, but if they were, the fault is with them and not with those who use it.
As we discussed the other day, if you don't happen to want to spend money on something which does not attract a tax then the fact that you also reduce your tax liability does not make you a bad person.
However, if you reduce your tax liability by defining your accounts in ways which are not remotely reasonable, you may possibly be staying within the law, but morally you are entering a grey area. If you tell what amount to lies when filing your accounts, you are either breaking the law or the person who drafted the law was an idiot.