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.