Saving in ISAs and taking the bus – crimes according to Clegg
Posted on September 9, 2010There are very few people out there in politics who genuinely mix up tax avoidance and tax evasion. Among the lay population the two can easily be confused for obvious reasons, but it’s long been a hobby of high taxers to deliberately elide the two in order to mislead the public. Sadly, Nick Clegg has repeated that sin in his speech to Lib Dem conference.
Tax evasion is a crime – and it should be punished. Tax avoidance, on the other hand, is simply a smear term for perfectly legal, indeed desirable measures taken to not pay any more tax than you have to. It’s not wrong – it is by definition obeying the law.
If Nick Clegg or anyone else doesn’t like the levels of tax that people lawfully pay, then he should use democratic routes to change the legal rates. Smearing the law-abiding to imply they are criminals simply isn’t on. If they actually go down the proposed route of inspectors and lie-detectors to pick up on legal tax minimising, what will they do when they find it? They have no power to punish people who haven’t broken any laws or rules.
To properly illustrate the kind of behaviour Nick Clegg is talking about when he criticises tax avoidance, I thought it would be handy to start a list:
Saving money in ISAs - the ISA is specifically set up to help people avoid paying tax on their savings. If tax avoidance is wrong, then surely the Government will be slamming itself for aiding and abetting the sin by introducing such a shameless avoidance vehicle?
Giving money to charity – in order to encourage people to support worthy causes, there are a variety of tax-exemptions and reductions available on money given to charity. Will Nick Clegg be taxing charitable donations, or discouraging people from giving?
Taking public transport and buying greener cars – Successive Governments have ramped up fuel duty in order to discourage people from driving gas guzzlers or indeed from driving at all. The clear intention of the policy is to encourage people to avoid this tax by either using public transport or buying greener cars. Indeed, the Lib Dems have been key proponents of both forms of tax avoidance.
What other forms of evil tax avoidance is Nick Clegg planning to clamp down on? Suggestions on a postcard.
Tags: charity, Environmentalism, Green Cars, ISAs, Liberal DemocratConference, Liberal Democrats, Nick Clegg, Public transport, Savings, Tax, Tax Avoidance
Categories: Politics, Public spending, Westminster
Nick Clegg is a paradox. There are times you think he is a classical liberal; a libertarian. Then he comes out with this rubbish, and you wonder if he is a closet socialist. Does he believe it, or is he simply pandering to the left of his party?
22.09.2010 07:54
I worry you’re playing the man a bit too much here Mark. It’s pretty clear to me that of course Clegg isn’t advocating not using ISAs or not giving to charity or anything else you’ve mentioned. Clearly he’s getting at highly complicated structures (trusts, companies, accounting measures etc) used by High Net Worths, companies etc and set up by lawyers/accountancts to avoid paying tax that those unable to afford those services would pay in this country.
So at worst he is bashing the rich a bit – probably in a sop to the left of his party.
Would it not be more constructive to say that the only logical conclusion is that the tax system should be simpler and flatter…….
22.09.2010 08:02
I’ll add some more to your list – smokers who have cut down/quit due to high taxes; and people who have cut down on alcohol for the same reason; polluters who cut down due to landfil tax; drivers who selected their car based on emission tax breaks…
In fact every instance where the government has used taxation to influence public behaviour!
I find this manipulation of the public absolutely disgusting, so would welcome its end – but what are green taxes all about?
22.09.2010 08:04
What’s he not going to clamp down on?
He won’t clamp down on tax evasion in the Commons.
2003 pensions act. There is a litlte clause tacked on the end that exempts all MPs from taxation on their expenses and payoffs. Unlike the plebs.
22.09.2010 08:36
I think you’re making the mistake of confusing tax avoidance and tax mitigation, the difference between the two being the moral distinction, wrong or right, against the spirit of the law or with it.
To tackle tax avoidance is either the impossible task of changing people’s morals or more practically by changing legislation, aye? The government have the choice filling in the loopholes used in current tax avoidance practice and so making it all more complicated and potentially increasing tax avoidance, or simplifying the tax system to remove the opportunity for tax avoidance.
22.09.2010 09:28
I think what Clegg had in mind was more complex schemes such as arranging domicile advantageously; but that is quite legal and there is not a lot that the government can do about it in a global age. After all I am a tax avoider in France if I domicile my business that trades in France in UK just as much as if I domicile my business that trades in the UK in Luxemborg. Two important points
Since the Companies Act 2006 it is a specific obligation on Directors to act in a way that the Director considers to promote the success of the Company. So if the government over-taxes the Company compared to another domicile the Directors have to consider taking advantage of that. They could be in breach of the Act if they didn’t – taking all other matters into account.
Secondly the government itself accepts that differential tax rates influence behaviour and use them to encourage tax avoidance – such as introducing lower NI for start-ups outside London, the South East. Are they saying that anyone who takes advantage of this is a disgraceful tax avoider.
22.09.2010 11:12
PS It is a bit like queues at Tesco. If I push in I am a queue evader, if I choose the shortest queue, notice that the slightly longer queue has a quicker operator or that a new till is about to open up and wait there where there is no queue then I am just a sensible queue avoider
22.09.2010 11:16
PPS – I could add more subtle forms of avoidance such as going when I know the store is quiet, only buying 8 items so I can use the faster moving queue, getting a friend to join another queue and switch at the last minute if their’s is quicker (I think that regulations could be tightened up a bit on that one), using a shop that has self service machines with shorter queues or even shop online avoiding queues altogether – but having to be in at certain time. You see even the simplest systems have all sorts of avoidance strategies that any rational and fair person is bound to employ.
22.09.2010 11:50
Good points, Mark. The mainstream media need to sharpen up their act. Last night on Newsnight Kirsty Wark completely allowed the ever-disingenuous Chris Huhne to get away with portraying Vince Cable’s criticism of capitalism as an attack only on monopolies, when Cable’s words in fact suggest a far broader agenda and far more disturbing attitude.
22.09.2010 15:18
One presumes that Clegg and Cable would be very harsh on people who change the designation of their main residence to avoid capital gains tax like …..erm…… Danny Alexander?
“The new Treasury chief secretary, Danny Alexander, avoided paying capital gains tax on the profit he made from his taxpayer-funded second home in London, it was claimed last night.”
“Under House of Commons rules, Alexander was permitted to designate it as a second home, but he told Revenue and Customs it was his main residence.”
http://www.guardian.co.uk/politics/2010/may/30/alexander-replaces-laws-at-treasury
22.09.2010 19:30
Tie this in with the tax people wanting wages paid direct to them and we thought Liebour were control freaks.
“fellow lobbyist ” I think you are very naive if you think if this is allowed it will end there.
Next it will be claiming you pension, next getting the dole, next insuring you car, next not putting your trolley away after shopping at Tesco, next using the wrong light bulbs.
Next move on to torture water boarding.
Wonder where he got the idea from….What a surprise Russia!
http://www.tax-news.com/news/Russian_Tax_Police_To_Use_Lie_Detectors_Report_Reveals____10878.html
23.09.2010 02:10
Captain Peacock, just for the record, I am worried indeed about the lie-detectors proposal, all such anti-civil-liberties rich-bashing and anything that increases the complexity in the system. I fear the taxman all the time. I just thought Mark was taking the opportunity to Clegg-bash rather than set out what might be better.
23.09.2010 18:18
[...] This post was mentioned on Twitter by Mark Wallace and Mark Wallace, Bethany Wheatley. Bethany Wheatley said: RT @wallaceme: Crash Bang Wallace: Taking the bus, saving in ISAs – crimes according to Clegg http://bit.ly/cddwO7 [...]
24.09.2010 00:52
A few more crimes for all to commit:
Drive carefully, accelerate gently and anticipate congestion or lights ahead. Follow a horsebox on motorway journeys. Save up to 20% on fuel taxes.
Stop watching TV, stop paying the BBC window tax. If you must, watch TV at a friend’s house.
Make your own beer/wine/cider – good fun and the results can be better (or worse) than bought.
Grow your own tobacco. Duty is payable when the cured tobacco is cut or shredded for use. There is no current mechanism for collecting the tax so it isn’t.
Stop buying all the stuff you never knew you needed and subsequently discovered you didn’t.
Save VAT on eating out by eating in – hire a chef to cook for entertaining at home, and eat and drink better quality for a lot less.
Cutting down on VAT cuts the EU’s income – a bonus.
Winston
01.10.2010 13:42