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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 20th May 13, 9:31 AM
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    Former MSE Helen
    'Should MoneySavingExpert encourage tax avoidance?' blog discussion
    • #1
    • 20th May 13, 9:31 AM
    'Should MoneySavingExpert encourage tax avoidance?' blog discussion 20th May 13 at 9:31 AM
    This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.





    Please click 'post reply' to discuss below.
    Last edited by Former MSE Helen; 20-05-2013 at 9:35 AM.
Page 1
    • Somerset
    • By Somerset 20th May 13, 11:03 AM
    • 3,556 Posts
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    Somerset
    • #2
    • 20th May 13, 11:03 AM
    • #2
    • 20th May 13, 11:03 AM
    Yes, why shouldn't MSE allow contributor's to discuss tax avoidance ?

    It's ( in your and some people's eye's ) the dirty side of MSE. But it's as 'moral' as allowing price glitches (!!!!-up's)/switch your account for the 'bung' then switch again etc. Why is it acceptable to be good for a person/bad for a company but not good for a person/bad for the tax coffer's ? Pretty hypocritical.

    You either comply with tax legislation or you don't. The first is right, the second is wrong. Morality doesn't come in to it.
    • jamesd
    • By jamesd 20th May 13, 11:51 AM
    • 23,524 Posts
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    jamesd
    • #3
    • 20th May 13, 11:51 AM
    • #3
    • 20th May 13, 11:51 AM
    I do not agree with what looks like manipulation of definitions to try to draw a line between various types of tax avoidance, from ISAs through pensions and locating yourself or your investments in low tax locations, all provided they are done fully within the law of the relevant jurisdictions.

    Here are the top three results from using a UK=-based Google search for the phrase "define tax avoidance" without quotes:

    "the minimization of tax liability by lawful methods". wordnetweb.princeton.edu/perl/webwn

    "The use of legal methods to modify an individual's financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal. Most taxpayers use some forms of tax avoidance. For example, individuals who contribute to employer-sponsored retirement plans with pre-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn is usually less than the amount that the individual would owe today. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate". www.investopedia.com/terms/t/tax_avoidance.asp

    "Tackling tax avoidance: ... Tax avoidance is bending the rules of the tax system to
    gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. ... Tax avoidance is not the same as tax planning. Tax planning involves using tax reliefs for the purpose for which they were intended" http://www.hmrc.gov.uk/about/briefings/briefing-avoidance.pdf

    The law also provides that a broad range of tax avoidance methods must be disclosed to HMRC within five days of them being set up, and HMRC is capable of and has acted to prevent the use of avoidance methods that it thinks are not appropriate, by means such as getting the law changed.

    That notify and let HMRC and politicians act if desired method seems like an eminently sensible way to operate things, so individuals can attempt to optimise their finances while HMRC and politicians can say that certain things aren't what was really intended and shouldn't be done.

    The key fact about all forms of tax avoidance is that they are completely lawful and it is entirely possible for politicians to modify the law to eliminate them if they wish to do so. If they wish they can do so by giving HMRC a pre-emptive "you may not do this for x months" while we review it, much as the FCA now has or soon will have that power delegated to it by Parliament.

    Some methods can and should perhaps be changed from legal to illegal but while that is not the case, individuals and businesses should be encouraged to minimise their tax bills so their money can be used for other productive purposes. Like paying out money to the people who own those companies in their ISAs and pensions. The money saved doesn't vanish, it goes to the people who own those companies. Us.

    The solution here is not manipulating words, it's adjusting any laws that need adjusting.

    Lets perhaps try to work out what you consider to be tax avoidance that should be encouraged and tax avoidance that should be discouraged, ignoring for the moment the ruling of lord Tomlin in IRC v Duke of Westminster that "Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax":

    1. An individual setting up a company so that they can lend to consumers and deduct bad debt from their interest earnings, something they cannot do as an individual.
    2. An individual using pension contributions to take their taxable pay down to a level where they are eligible for Working Tax Credits, then claiming those credits.
    3. An individual selling their labour as a business rather than using an employment agency that has them as a PAYE employee even while they switch between companies regularly.
    4. An individual using a pension tax free lump sum to pay their mortgage capital.
    5. An individual recycling pension income into more pension contributions.
    6. An individual recycling a pension lump sum, within the limits for this activity specified by HMRC, including structuring the timing and amounts so that any recycling is within the rules rather than outside them.
    7. An individual uses a scheme covered by HMRC's "Disclosure of tax avoidance schemes" requirements, more than six months after HMRC has been notified about the scheme and has not informed the operators or individuals that they dislike it.
    8. As 7 but within a few days of the notification, before HMRC has had months to decide whether they do or don't agree and get the law changed if they disagree.
    9. A sole trader selling only their own personal labour setting themselves up as a company and paying their income by dividends instead of income tax. Consider different cases for brick layer, TV personality and footballer if you find this useful in determining who should or should not be allowed to do this.
    10. A person taking out a mortgage secured on their own home to purchase a BTL property and deducting the interest on the mortgage from rental income.

    Most of those have pretty clear lawful definitions but some are subject to criticism of various types. Are there any that MSE dislikes enough not to want here?

    Google and Amazon are able to avoid tax for a pretty simple reason: that's what the laws are written to allow them to do, as international companies. Whether the laws should allow that is perhaps a more interesting question. If the customer is here, perhaps that's also where that tax should be due? It is clearly conceivable to do so, for in the US there are moves to require internet firms to pay the sales tax rate charged on in-state sales in the states to which their customers are having goods shipped.

    As a purely practical matter, it's inevitable that the individual Martin Lewis will be pitched more options for tax avoidance than I or most participants here. That's because most individuals don't have sufficiently high incomes, wealth or working patterns to benefit from things that are less often used.

    As you may gather, I'm very much in favour of a "tell HMRC and let them sort it out" approach, so that everyone can end up knowing whether what they are doing is or is not going to be lawful avoidance or unlawful. And of completely eliminating the undesirable avoidance category.

    A note here about the individual Martin Lewis: my personal view from the very limited insight I have into your own financial circumstances suggests that at least much of them should not be subject to criticism, though some may fall within the potentially controversial category and be included within one or more of the cases I've mentioned above that are subject to criticism at times. Since I also have the view that you should not have to comment on your own tax affairs if you don't want to, please do refrain from commenting on any that might apply to you if you wish. This discussion isn't about your personal tax affairs and should not morph into such discussion. Indeed, while I would prefer it if it was not done, please also take this as an invitation for the Forum Team to modify the contents of my list to facilitate this protection of the privacy of your personal tax affairs if you wish.
  • Wywth
    • #4
    • 20th May 13, 11:51 AM
    • #4
    • 20th May 13, 11:51 AM
    Yet recently Iíve even been shocked to see some on Twitter and Facebook point the finger at MSE for encouraging people to save into ISAs.
    Ignore them Martin.

    Surely you've heard of Britain's 'build them up to knock them down' celebrity culture ?

    You need a thick skin in the business you're in, especially if you plan to continue using the likes of twitter and facebook as well.

    Follow the advice Michael Mates gave to Asil Nadir
    • Rafter
    • By Rafter 20th May 13, 12:30 PM
    • 3,837 Posts
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    Rafter
    • #5
    • 20th May 13, 12:30 PM
    • #5
    • 20th May 13, 12:30 PM
    Here here. Totally agree with the MSE position on this one.

    Ultimately companies and individuals who use agressive (but legal) tax avoidance mean that the rest of us end up paying more tax or getting less public services.

    Moneysaving is something completely different: usually the transfer of wealth from companies to individuals allowing them to spend more or save more.

    Given companies generally seem to pay less marginal tax (and avoid tax more effectively) than individuals this is ironically probably a good thing for the government coffers!

    It all boils down to our tax system being far too complicated though and tax avoidance being far too lucrative. It seems to me that we need some backstop tax rules so that if a big profitable company or very wealthy individual is generating a lot of their wealth in the UK (from us), they have to pay a minimum rate of tax in the UK, regardless of the complex tax haven structures they have set up to avoid it.

    Otherwise it is unfair on companies who do comply with both the spirit and letter of tax regulation. And it is unfair on us, because not only are we paying for the services of these companies and individuals, we are also having to pay more tax because the profits they are making are cleverly syphoned off, usually outside the country.

    We need to get back to a position where our economy is making real goods and providing real services and that this is more lucrative than financial and tax engineering!

    R
    Smile , it makes people wonder what you have been up to.
    • lazer
    • By lazer 20th May 13, 12:42 PM
    • 3,230 Posts
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    lazer
    • #6
    • 20th May 13, 12:42 PM
    • #6
    • 20th May 13, 12:42 PM
    Tax avoidance is perfectly legal and in my eyes not even immoral (in general - some schemes that distort results to move the tax burden to lower countries through management fees etc - may be scraping the bottom of the barrel though)

    But simple things like ISA's, pensions etc are all tax avoidance and use of them should be encouraged. Tax avoidance is about saving as much tax as you can - isn't what this site is all about - money saving?

    I know Martin says ISA's etc aren't tax avoidance but really IMO they are.
    Tax avoidance is using government schemes and loopholes to save tax.

    As long as we all pay the tax we owe I am fine with it, why would we want to may more than we have too?

    I am more fine with tax avoidance than I am with debt avoidance - I hate some of the advice on this forum about how to get out of paying debt which you signed up for in the first place.
    Weight loss challenge, lose 15lb in 6 weeks before Christmas.
    • Million Percent
    • By Million Percent 20th May 13, 12:48 PM
    • 188 Posts
    • 206 Thanks
    Million Percent
    • #7
    • 20th May 13, 12:48 PM
    • #7
    • 20th May 13, 12:48 PM
    In my view, tax avoidance is using rules in ways that they were not intended. Bottom line is the lawmakers need to close the gaps. Can't blame any individual or company for minimising their liability.
    • pcw12kcox
    • By pcw12kcox 20th May 13, 1:45 PM
    • 9 Posts
    • 24 Thanks
    pcw12kcox
    • #8
    • 20th May 13, 1:45 PM
    • #8
    • 20th May 13, 1:45 PM
    I have to concur with other posters - placing money in ISAs, pensions or tax free savings certificates is a form of tax avoidance - for two simple reasons:
    - you are using a legal method to avoid paying tax that you would otherwise have to pay.
    - Given the consequence of you, and others, using these methods of avoidance it means that the Government has to raise more taxes elsewhere.
    • Million Percent
    • By Million Percent 20th May 13, 3:53 PM
    • 188 Posts
    • 206 Thanks
    Million Percent
    • #9
    • 20th May 13, 3:53 PM
    • #9
    • 20th May 13, 3:53 PM
    If the laws were tightened so companies like Google and Amazon paid their share, would it just mean that they'd increase prices to maintain profits? Whatever happens, ultimately it's the guy at the bottom of the pile who pays isn't it?

    Also, even if the government did increase the tax take by reducing such large scale avoidance, would the 'saving' be passed back to the populace via an income tax cut? I doubt it. I guess it would disappear into our deficit black hole. We might get a token gesture.

    I guess I'd rather these companies pay their share even if it means their prices go up. At least you have a choice whether or not to buy their products.
    • Rafter
    • By Rafter 20th May 13, 6:05 PM
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    Rafter
    If the laws were tightened so companies like Google and Amazon paid their share, would it just mean that they'd increase prices to maintain profits? Whatever happens, ultimately it's the guy at the bottom of the pile who pays isn't it?

    Also, even if the government did increase the tax take by reducing such large scale avoidance, would the 'saving' be passed back to the populace via an income tax cut? I doubt it. I guess it would disappear into our deficit black hole. We might get a token gesture.

    I guess I'd rather these companies pay their share even if it means their prices go up. At least you have a choice whether or not to buy their products.
    Originally posted by Million Percent
    MillionPercent,

    Been through the same thought process when deciding whether I should keep shopping at Amazon too!

    Came to the conclusion that I should pay a bit more but that overall there should be no difference because (in theory at least) my tax bill should come down too.

    The losers would be tax accountants and tax havens (no bad thing in my view) but that it would be good for competition and consumers overall.

    Ultimately I believe the success of companies or individuals should be based on how good your product is or how talented you are - not just how good you are at manipulating the rules to your advantage to stifle or get one over on the competition!

    R
    Smile , it makes people wonder what you have been up to.
  • jonthedog
    TV licence
    The TV licence fee is also effectively a tax. By advising people to not pay it if they only watch iPlayer, I'd say MSE crosses its own line from 'planning' to avoidance.
    • Steve059
    • By Steve059 20th May 13, 10:00 PM
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    Steve059
    The TV licence fee is also effectively a tax. By advising people to not pay it if they only watch iPlayer, I'd say MSE crosses its own line from 'planning' to avoidance.
    Originally posted by jonthedog
    The TV Licencing website clearly states that you don't need a licence to use services like iPlayer to watch "catch up" programs, ie. not at the same time as they are being broadcast.
    Last edited by Steve059; 20-05-2013 at 10:08 PM.
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    • Million Percent
    • By Million Percent 21st May 13, 10:10 AM
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    Million Percent
    The TV licence fee is also effectively a tax. By advising people to not pay it if they only watch iPlayer, I'd say MSE crosses its own line from 'planning' to avoidance.
    Originally posted by jonthedog
    I disagree. Even if one does regard the TV license as a tax then it is a tax on the use of a specific service. If someone chooses to not use that service and therefore not be subject to the tax then that is their free choice. You can't describe it as tax avoidance any more than not owning a car is 'avoidance' of road tax.

    Tax avoidance is abusing the rules of the system to achieve an outcome that was never intended when those rules were written. I think we all agree it's the rules that need changing.

    As for MSE's position, I think they have the balance about right. But they shouldn't try and take any moral high ground on the issue because there are a lot of parallels between some of the advice from MSE and the tax avoidance tactics that these big corporations use.

    For example, a young person can reduce their car insurance by putting one of their parents on the policy as a named driver even though the parent never drives the car.

    I often get sainsburys vouchers offering significant money off online orders from 'new' customers. Their definition of a new customer is an account registered to a different email address. I've registered several email addresses and used the 'new customer' vouchers several times.

    Both of these examples are an abuse of the rules of the system to gain an advantage not intended by the system's creator - not illegal or breaking the rules and we don't say it's immoral to do it. People need to be very careful before making tax avoidance an issue of morality.
    Last edited by Million Percent; 21-05-2013 at 10:13 AM.
  • jonthedog
    Tax avoidance is abusing the rules of the system to achieve an outcome that was never intended when those rules were written. I think we all agree it's the rules that need changing.
    Originally posted by Million Percent
    The BBC has no mandate in law to insist the licence fee is paid to watch catch up programming, purely because it was not conceived when the detail of the law was written.
    • A non-license payer watching Live TV on iplayer is watching content they did not pay for and evading the tax.
    • A non-license payer watching the same program on catch up, is also abusing the system by watching content they did not pay for, but is merely avoiding the tax.
    The morality is the same; as a licence payer it doesn't matter to me whether they watched the program live, or half an hour later; they are still watching content for free that I have paid for and 'morally' they should too.

    The law is not likely to change in the near future as people that 'only' watch iplayer on catch up and don't have a TV represent a very small proportion of non-licence payers, but it is a fairly clear cut example of MSE encouraging avoidance.
    The legal situation exists not because the government is trying to encourage people to behave in a particular way, but is a loophole that has yet to be closed. It couldn't possibly be thought of as tax 'planning', and it goes against Martin's claims for MSE that: "we don’t, never have" encouraged this behaviour in the blog.
    • Million Percent
    • By Million Percent 21st May 13, 4:57 PM
    • 188 Posts
    • 206 Thanks
    Million Percent
    I think in a round about way we kind of agree on the broader issue here that MSE is not in a position to take the moral high ground. MSE may not advise specifically on tax avoidance (or may not believe they do) but they do encourage consumers to 'play' other systems in similar ways (such as the car insurance example). It's a fine line.

    It seems like playing the system is acceptable behaviour if it's the common man gaining an advantage over a big business. But if it's big business or a wealthy individual gaining an advantage over the taxman then that's not acceptable. Clearly it's not a case of morality or principle. If it were then both cases would be unacceptable.
    • marleyboy
    • By marleyboy 21st May 13, 5:24 PM
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    marleyboy
    MSE should encourage making the most of the pounds whilst spending less of them by the use of legal avenues ONLY. Morals don't come into it, it may be morally wrong to shop at Primark or Starbucks as a result of their tax avoidance or evasion schemes, but there is no legal wrangle as to whether or not we should.

    If there is a legal route one can use to pay out less to the coffers, there is nothing legally wrong with using the system to do so. Any company would argue that the purpose of finance, involves making the maximum amount of profits with the minimum amount of costs.
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    • callum9999
    • By callum9999 22nd May 13, 12:10 PM
    • 3,951 Posts
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    callum9999
    I'm confused why avoiding tax "aggressively" is so evil, but "timidly" is right? Who created this arbitrary line where morality switches between the two?

    Logically, avoiding tax should either be moral or immoral. Avoiding a little tax is "less" immoral than avoiding a lot of tax (assuming you think avoiding tax is immoral), but at the end of the day you are doing the exact same thing - reducing your tax bill while fully complying with the law.
    • callum9999
    • By callum9999 22nd May 13, 12:14 PM
    • 3,951 Posts
    • 2,408 Thanks
    callum9999
    The TV Licencing website clearly states that you don't need a licence to use services like iPlayer to watch "catch up" programs, ie. not at the same time as they are being broadcast.
    Originally posted by Steve059
    Nor do Google have to pay the tax people are demanding they do, yet that is allegedly still immoral.

    On the whole, people don't have a problem with less tax being paid, they have a problem with people/companies wealthier than them paying less tax. I.e. they want to get away with as much as they can and have others pick up the slack for them.
    • iAMaLONDONER
    • By iAMaLONDONER 22nd May 13, 12:30 PM
    • 1,620 Posts
    • 386 Thanks
    iAMaLONDONER
    Nor do Google have to pay the tax people are demanding they do, yet that is allegedly still immoral.

    On the whole, people don't have a problem with less tax being paid, they have a problem with people/companies wealthier than them paying less tax. I.e. they want to get away with as much as they can and have others pick up the slack for them.
    Originally posted by callum9999
    I guess it's just human nature!
    • zerog
    • By zerog 22nd May 13, 1:16 PM
    • 2,443 Posts
    • 862 Thanks
    zerog
    ISAs are a government scheme to reduce the tax people pay on savings. Being a member of the EU is a government scheme to allow companies to move freely to a country where tax is lower! What's the difference?
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