@RichardJMurphy still doesn\’t understand the law

There is no simple black and white dividing line between legal and illegal. There is a massive grey area between the two where no one can be sure whether things are right or wrong, legal or illegal, permitted or unacceptable.

It is in this grey area of uncertainty that tax avoidance exists. More than that, it is this uncertainty that it exploits. And it does so deliberately. But that uncertainty means no one can be sure that tax avoidance is legal, because by definition it has not been permitted by law, so that claim cannot be made.

Assume this is true, what then?

Well, we need a system of delineating that line then, don\’t we? And in fact we do have such a system. It\’s called the Law Courts. All the way from the local magistrate up through the tax commissioners, through the High Court, Court of Appeal, Supreme Court and then off into Europe.

At which point we get final rulings on whether a specific activity is legal or not. And thus tax avoidance collapses down into tax compliance (yes, the law does say you can do that) or tax evasion (no, the law does not say you can do that, cough up, go to jail and do not collect £200).

At which point we can go through the whole boring list of all of Ritchie\’s accusations of tax avoidance. The Greens? Transfers between husband and wife are not taxable. We\’ve statute that says that. UK dividends paid to non-resident, non-domiciled, foreigners are not UK taxable, we\’ve statute that says that. So no tax avoidance there at all.

Starbucks ain\’t making a UK profit so there\’s no corporation tax due. That\’s even when we reverse back in the royalties (which EU statute insists that we\’re not allowed to tax).

Boots? EU statute says we cannot tax those interest payments. And so on and so on.

And then we get to things like Vodafone. In this one we actually had to use that court system to decide. So, this tax avoidance then. Which side of our line does it lie? And after we\’ve gone through the whole thing it turns out to have been tax compliance. A Luxembourg subsidiary is not subject to the UK\’s CFC rules. It just ain\’t.

That\’s why the settlement was that Vodafone would bring onshore some of those Lux profits and pay corporation tax on them in the normal manner. For everyone agrees that when you bring them onshore to pay a dividend you must pay corporation tax. So, that\’s what they did. That\’s why there were staged payments: because they didn\’t bring it all onshore in one year.

And that\’s what\’s wrong with the entirety of Ritchie\’s argument about tax. Sure, there are most certainly those who try to avoid paying tax. And we\’ve already got a system which decides whether that \”tax avoidance\” is tax compliance or tax evasion: the courts. That\’s what they\’re actually there for: to decide which side of the line any particular action is.

And the truth is that just about everything that Ritchie and UK Uncut and the rest have complained about has turned out to be tax compliance when tested by this system.

10 thoughts on “@RichardJMurphy still doesn\’t understand the law”

  1. The bit I find truely uppsetting and terrifying is this;

    “…because by definition it has not been permitted by law, so that claim cannot be made.”

    I do not like the idea of a definition of legality which requires the law to outline what is legal, rather than what is illegal. Everything should be permittted, unless it is specifically banned.

  2. So, make tax law ridiculously complicated, and have a generation of activist judges making stuff up, mix in European ‘case law’ and then he complains of a grey area in the Law?

    No shit mate. He can’t be serious though – that grey area is the soil where politics and other bullshit thrives.

  3. Paying money into a pension fund or an ISA using Gift Aid is specifically authorised by law (in fact the latter two were massively expanded by Murphy’s favourite Chancellor). All these legally avoid paying tax on the investment income/gain until they are cashed in.
    So tax avoidance IS approved by law. Murphy is just plain lying if he says it is not.

  4. @ John77

    He draws a distinction between avoidance that is explicitly legislated for (i.e. investing in an ISA) and avoidance that is contrary to the intention of legislation (say, structuing a group so that profits generated in a high tax jurisdiction are shifted to a low tax jurisdiction).

    His argument is OK, in theory. And even those of us who fight for the right of the taxpayer to use whatever legal means deemed necessaery to reduce his bill, would surely happily conceed that there are avoidance schemes that are entirely contrary to the intention of parliament, and that ISA’s and pensions are a somewhat different beast.

    Where RM’s argument breaks down is in his judgement of what parliament does or does not intend.

    The ISA argument is pretty unhelpful in terms of defining what tax avoidance is.. but it does help illustrate why tax avoidance opportunities arise… the government keeps tinkering with the tax code to try and get us to behave in certain ways.. and so they create opportunities for avoidance.

  5. Thought Gang, I think you’re giving him too much credit. He says he makes the distinction, but seems quite happy to ignore or bury rules that result in avoidance that he doesn’t like. Most of the list above, for a start.

    Frankly, his entire stance seems to collapse to simply stating over and over that those who handle a lot of money in connection to the UK(companies or individuals) should hand over a big chunk in tax, and bugger the allowances.

  6. Murphy says: “There is no simple black and white dividing line between legal and illegal. There is a massive grey area between the two where no one can be sure whether things are right or wrong, legal or illegal, permitted or unacceptable.”

    Actually, this is just plain wrong. Sure, the system is way too complex, but we still start with “default allow”, from which challenges can be made. For him to assert that “It is in this grey area of uncertainty that tax avoidance exists” is complete nonsense. It is Murphy’s opinion and desire – and nothing more than that.

    Avoidance is legal. If Parliament then considers that a legal activity is against its wishes, it can change the law. That activity then becomes illegal. Alternatively, if there is ambiguity as to whether an activity is avoidance or evasion, courts can decide. When a court decides it is legal, it is still avoidance. If the court decides not, then from that point forward it becomes evasion. What is actually so complicated about that. Actually, it’s the tax system itself that is complicated, not the concept of avoidance and evasion. If anything, we should be trying to simplify the tax system.

    I would suggest that engaging in the debate on terms that are continually shifting towards views like Murphy’s is a lost war, even if individual skirmishes are clearly “won” (as with Tim’s analysis above)… Because, as the redefined “terms” then become “accepted”, he will look to bank that one and then simply try and shift the goal posts again, continually moving towards his statist left wing world view. Much better in my mind to simply refuse people like that any wriggle room to start with.

  7. “I would suggest that engaging in the debate on terms that are continually shifting towards views like Murphy’s is a lost war”

    Totally and utterly agree. Terms such as tax compliance should not be used. It just muddies the waters in their favour.

    Similarly the term tax transparency should not be used. What does it mean? Nothing. But it can be used by the “other side” to mean anything the don’t like and want exposed. To use that term means you’ve already lost the argument as you battle to say why it should not be transparent. There is no such thing as tax transparency.

  8. @ TTG
    There is Tax Avoidance, which is legal, and Tax Evasion, which is illegal. There is no third way.
    Murphy is making things up when he talks about “tax compliance” (which would mean that the tax complied with something). Any tolerance of that enables Murphy to make up his own rules in utter disregard of the law or the intention of parliament.
    Transferring assets between husband and wife is *not* a grey area, it was specifically allowed by Parliament to make the incidence of tax fairer. but Murphy tries to claim this is a grey area in order to attack the Greens.

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