How does this work then?

Labour pledges huge fines on tax avoiders to raise £7.5bn a year

Tax avoidance, by definition, is not illegal. So, how can you fine people for doing it?

24 thoughts on “How does this work then?”

  1. They’ll be brought before the caught of public opinion and charged with failure to pay the morally correct amount of tax. They will then be bullied to pay the moral amount rather than that required by law.

  2. Nope…

    For starters, the headline is somewhat misleading as the £7.5 billion target figure is to come not just from fines but from a package of measures including the closure of some existing loopholes but when it comes to levying fines on tax “avoidance” the way you do that in law is quite easy – you make tax evasion a strict liability offence.

    We’re not dealing here with a simple binary.

    There is legal tax avoidance using tried and trusted methods which are known to be within the law, there is illegal tax evasion and then there are tax “avoidance” schemes based on “creative” interpretations of the law that are promoted and used in the belief that they are legal under current law but which, when tested in court, prove to be illegal.

    As things stand, if you put your money into one of the more creative avoidance schemes and it is subsequently deemed to have been illegal then you get a bill for the unpaid tax (plus interest) but you can’t be fined or prosecuted for tax evasion due to the absence of mens rea – in order to do more than stick you with a bill, HMRC has to show that you knew or should have known that the scheme was illegal.

    However, if you apply strict liability to evasion then the onus is on you to absolutely sure that what you’re doing is legal, so if you enter into a grey scheme and it subsequently turns out to have been illegal then tough shit, you get a big fine irrespective of whether or not you believed what you were doing was kosher.

    That’s how you fine people for tax avoidance. It’s harsh but its legally sound.

  3. @Andrew M

    No – even Balls says its “ambitious”, and they hope to hit it midway through the 5 year term.

    In any case its the whole ‘targets’ policy which sticks in my craw. They intend to carpet the head of HMRC before parliament for not meeting an “ambitious” (and likely plucked from the air) target.

  4. Also – what happens when the target is not met because there is no avoidance to fine? And to the funding target when that money is no longer available?

  5. Who cares how, or whether, it works? We should be celebrating those who try to minimise the tax they pay. Good for them.

  6. Mr Lud is correct. All taxation is theft that serves to empower the evil of the state. The money is not just pissed against the wall: it is used actively promote tyranny.

    The time is coming to say “Fuck Off”–not just to the products of democracy but to the process as well. Freedom is what matters–is all that matters.

  7. Really, both Tory and Labour have been reduced to shouting peanut ideas to attract the odd stray monkey.

    No thought whatsoever has gone into these press releases other than “does it sound good”.

    Just as Same day appointments for 75 year olds appeals to the old crock Tory voter, so making billions from rich people appeals to the Marxist.

    Neither concept has a cat in hells chance of becoming reality. All this campaign has done is to show the utter contempt that politicians have for us.

  8. @ Unity
    You are describing tax evasion thinly disguised as attempted tax avoidance as “tax avoidance”.
    Wrong. Tax evasion is tax evasion, just not liable to get you into jail if you can plead that your tax adviser told you it was legal.
    Fines for tax avoidance means fines for something that is not a crime.

  9. So Much for Subtlety

    john77 – “Fines for tax avoidance means fines for something that is not a crime.”

    I believe the British state is courageous enough to fine people for perfectly legal actions.

  10. @Unity

    “As things stand, if you put your money into one of the more creative avoidance schemes and it is subsequently deemed to have been illegal then you get a bill for the unpaid tax (plus interest) but you can’t be fined or prosecuted for tax evasion”

    Perhaps not fined for tax “evasion” but the fact is that you can be fined. Suggest you google “Bernard Litman tax case”

  11. DocBud, how dare you! I have family in Norfolk. Greeting is always by way of a “high six”…

  12. This mindset was perfectly summed up today by the head watermelon who said ‘the highest earners are taking too much out of society’ and need to ‘pay back’.

    We are all serfs.

  13. Unity

    A “creative avoidance scheme” remains legal; it just doesn’t have the desired tax outcome. The arrangment doesn’t become ‘illegal’ just because it doesn’t work.

    And if it doesn’t work then the return will be incorrect..and penalties may become due; but it depends.

  14. You’re all being a bit disingenous here. You fine someone for tax avoidance by looking for the most common avoidance schemes and making those illegal, thus turning it into tax evasion.

    It doesn’t sound as good if Balls says “we want to make common avoidance schemes evasion”

  15. Quite so, JQ
    Abolishing tax avoidance on ISAs, pension contributions, R&D, tech investment, films, and so on would put a big dent not just in the avoidance but also the deficit. Lowering the VAT threshold to the personal allowance would bring in even more.

    And a grateful nation would elect a Labour government on a tidal wave of… bollocks.

  16. Er, if Parliament legislates for tax relief to be available for those who claim them in their returns, then by definition it is not tax avoidance. I have money in an ISA, exactly as Parliament intended and so not avoidance. My business is making films, we claim Film Tax Credit just like Parliament sets out: not avoidance.

  17. @ bif
    Lowering the VAT threshold to the pertsonal allowance sounds plausible and would raise some tax revenuebut HMRC raised it because they reckoned the low threshold created more work for them than they thought it was worth. Obviously before the union hired Murphy to tell everyone that extra work for tax offiers is totally wonderful. HMRC have gone further with the flat-rate tax scheme which is virtually guaranteed to reduce tax receipts because it is optional so one only signs up to it if one thinks one will pay less tax thereby *but it means less work for HMRC staff”.

  18. Unity is correct. The legal distinction between tax evasion and tax avoidance is frayed at the edges, and is not always clear cut.

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