Reducing tax avoidance: more signs of progress

To expect a government to end tax avoidance, or even evasion, completely is to set the bar far too high. As with many other things governments try to tackle, a perfect outcome is not expected even in the theory textbooks. Rather, the way to judge the messy reality of life is by how much better or worse things are being made, not by whether or not they have reached an unobtainable perfection.

So on taxes, the continuing existence of loopholes is not a reason to scream “failure”. Sensible judgement comes from how good a job the government is doing at minimising their number. On that there is some promising news, both old and new.

The older news is the one I covered in May:

Britain’s only listed accountancy firm is to close its specialist tax division in a move that will be regarded as another victory for Revenue & Customs against tax avoidance by the rich.

RSM Tenon said yesterday that it would stop offering products through its Premier Strategies division because recent moves by the Government to clamp down on what it perceives as aggressive tax avoidance had made the tax planning business too difficult and risky.

The new news is from this month:

Wealthy investors including Sir Alex Ferguson, Sven-Göran Eriksson and a host of sports stars and City figures could be liable for huge individual tax bills after an attempt to reduce their liabilities backfired…

The Revenue told the Financial Times this week that it was treating the “sub-licensing” payments as income and liable for tax, meaning investors stand to receive tax bills far greater than the income tax they originally tried to avoid.

And the even newer news is from today:

A barrage of regulatory clampdowns and political attacks on the Channel Islands’ controversial financial industry has prompted one of Jersey’s most senior politicians to call for preparations to be made to break the “thrall of Whitehall” and declare independence from the UK.

For decades Jersey’s tax, legal and regulatory framework has been structured to draw in the financial activities of multinational businesses and wealthy individuals. But a growing backlash has seen politicians in the UK and elsewhere lashing out at aggressive schemes leeching tax revenues from the increasingly stretched public wallets.

That’s not going to be the end of the story, as the government is now consulting on the detailed legal wording for a new law to tighten up the tax rules.