That’s not bad, but I prefer to compare tax avoidance, which is hard to define, with tax compliance which I find easier to define. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
In that case tax avoidance happens whenever someone chooses a course of action which results in the wrong amount of tax being paid, in the wrong place and at the wrong time.
Boots is a Swiss company paying cortporation tax in Switzerland. Where interest is a tax deductible cost of the business. Given that this is what Boots did, deducted interest before calculating profits upon which tax was due, Boots did not indulge in any tax avoidance.
All of which rather amuses. By Murphy\’s very definition of tax avoidance none of the four majoe UK Uncut cases actually avoided tax.
I wonder when the Great Guru is going to let the teenage trots know this?
Erm, no. Boots is, in terms of economic substance, in the UK: the vast majority of its employees are in the UK, the vast majority of its revenues are generated in the UK, and its senior managers are based in the UK. Its Swiss presence is solely a legal fiction.
Wouldn’t Dickie’s vision of tax compliance require capital controls?
Tim, have you noticed that some site called “before it’s news” appears to be republishing your content?
Tim adds: Yes, not sure why. The tracbacks from here are no follow so they don’t get any ranking benefit from the link.
johnb (#1) is probably right that the underlying profits are made in the UK.
But the interest on the debt would be deductible under UK law as well (and a specific, relatively recent law that allows it – no stretching of definitions needed), so it’s still tax compliance on Murphy’s definition.
Seems Murphy is winning the argument here though.. sob sob..
The Telegraph carries an article based on Murphy’s blather (22/6). “Tax expert: ‘anti-avoidance principle’ would beat dodgers forever”. Where newspapers ever any good or is that a false belief in a golden age.
“In that case tax avoidance happens whenever someone chooses a course of action which results in the wrong amount of tax being paid, in the wrong place and at the wrong time.”
Uh, that ain’t “tax avoidance”.
Proof positive – once again – Richard Murphy demonstrates that he doesn’t understand the concept of “tax avoidance”.
Can someone provide me (one of Timmy’s *thick Northern lads!) with a precise definition of tax avoidance, please? It seems to me there’s no such thing according to most contributors on here.. it’s either tax mitigation or outright (illegal) evasion, no middle ground. Or have I got that wrong?
Tim adds: That is pretty much it. There is tax complaince, obeying the law about taxes. Then there’s tax evasion, breaking the law about taxes. And that’s it.
Tax avoidance is an invention of certain deluded souls. It describes what is in fact tax compliance but what they think should be classed as tax evasion.
Very few people would accept Tim’s assertion that there is no such thing as tax avoidance.
There are clearly schemes out there which have no justification other than to deprive the public revenue of funds. Most people find that unacceptable.
Murphy may be a pompous prig, but even you lot must admit that he’s winning the battle now.
Even David Cameron appears to be on his side now. The tide has undoubtedly turned.
“Most people find that unacceptable”.
Then most people will get what they deserve, good and hard.
I think many people would agree that avoidance is where you take an action that results in you paying less tax than previously without any other significant effect.
For example, working less hours or moving abroad or choosing not to buy a taxed item are all ways to reduce tax, but they all impinge on your life in other ways. The tax aspect can be argued as s secondary concern. Whereas instructing your accountant to open a trust and channel money through it has no net effect except to increase the amount of money you get to keep.
Mind you, opening an ISA would become avoidance under this definition, which just goes to prove that using the term “tax avoidance” is pretty much a waste of time.
“Winning the battle” in the sense of convincing the staff of the Telegraph that you’re right is not the same as winning the battle in terms of legislation. There are wider concerns involved in tax law (I think) than the narrow one of getting as much money as you can in the short term and damn the consequences.
Anyway, given that the definition of avoidance is so broad, it doesn’t make sense to treat the issue as if it were monolithic, as MrPotarto suggests.
Regardless. Switzerland’s tax regiem is more attractive. Therefore, a better place to head office yourself. End.
Tax avoidance (if it could be precisely defined) is a result of tax allowances being too complex and of taxes being too high. So cut income tax to (say) 15% at the higher rate, abolish all allowances, increase indirect taxes and make any desired redistribution via benefits (and/or citizens’ basic income).
There are verbal games being played out there which Orwell would have recognised.
In this case, there is an attempt to shift the definition of “avoidance” to merge with “evasion”, so that the first attracts the same opprobrium as the second.
One way to stop it is to point out that anyone who claims their personal allowance, directly or through their PAYE code, is avoiding tax.
From a Certified Public Accountant…
Tax Avoidance is defined as the following:
“Any and all actions taken by the taxpayer to minimize taxation by any and all means legally available.”
Tax Evasion is defined as the following:
“Any and all actions taken by the taxpayer to minimize taxation by any and all means specifically prohibited by law.”
It’s not that hard… you just need more than the seven working brain cells Murphy is blessed with.
In which case “Tax Avoidance” is a combination of “professional tax planning” (in that some poor bastard has to read the acres of dead trees and tortured electrons our respective legislatures turn out every year to identify what they are trying to encourage investment in and see if it might be of some use) and sheer bloody common sense.
I’ve got 2 antiques to sell. They are from a popular niche and they’re going to each net me a gain of about £10,000. I’m not desperate for the cash. My local auction has relevant sales on the 10th of each month and it’s 1 Mar. Do I put them both up this month and get whacked for CGT or one up this and one up next?
OMG – I’ve (not yet criminally but will be if the WGCE gets his evil way) avoided £3k-ish in tax!
MrPotarto (#12) said: “opening an ISA would become avoidance under this definition”
Opening an ISA is undoubtedly tax avoidance under any definition.
You and the bank have conspired to use an artificial structure to reduce tax. You would not use an ISA were it not for the tax advantage, since it has no non-tax advantages and has the disadvantage of increased regulatory costs.
P.S. Before anybody misunderstands #19, I’m not saying that therefore ISAs are bad things. I’m merely pointing out how ridiculous it is to get worked up about tax avoidance.
Is it worth pointing out that to our pet WGCE, tax compliance is seeking to pay the right amount of tax (but no more), as determined by said WGCE, in the right place, as chosen by said WGCE, at the right time, as calculated by said WGCE, where right means that our WGCE thinks the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes?
So Boots et al have sinned because Ritchie has his own personal definition of the right time, the right place and the right amount. Which has little or no relationship with objective reality.
“Proof positive – once again – Richard Murphy demonstrates that he doesn’t understand the concept of “tax avoidance”.”
Since when have facts ever got in the way of Dick Murphy and his Koorayjus Stayt?
I can’t believe some people are still trotting out the old canard that ISAs, personal allowances etc are tax avoidance. Claiming reliefs, allowances and exemptions that are specifically laid down by Parliament is not tax avoidance and anyone who says so is either being wilfully deceptive or astoundingly delusional.
A scheme such as Carr’s had no purpose other than to avoid tax. Where a taxpayer inserts steps into a series of transaction which have no purpose other than to avoid tax, HMRC should be allowed to disregard those steps.