In July 2012, HMRC published the consultation document Lifting the Lid on Tax Avoidance Schemes (http://webarchive.nationalarchives.gov.uk/20140109143644/http://www.hmrc.gov.uk/avoidance/tax-avoidance-schemes.pdf). I supplied the following comments to HMRC.
Section 2.1 states, "Tax avoidance represents nearly 14% of the UK tax gap. It involves using the tax law to gain an advantage that Parliament never intended and frequently involves contrived, artificial transactions that serve little or no purpose other than to reduce tax liability."
Tax avoidance is a legal method of decreasing tax.
If the law is unclear or unfair, then Parliament must change the law. HMRC's role is to collect tax, not to specify the law.
Section 3.1 states, "The Government wants to increase and improve the information available to the public about tax avoidance arrangements and the risks associated with using them by building an environment where responsible tax agents, businesses, individuals and HMRC work together to combat tax avoidance."
HMRC wants to prevent tax avoidance, but tax avoidance is legal.
In April 2012, the Trades Union Congress wrote, "Media investigations about the tax arrangements of companies like Amazon, Google and Barclays show that some companies are paying virtually no corporation tax despite enjoying huge profits..." (www.tuc.org.uk/economic-issues/tax/big-companies-pay-lower-tax-rate-their-profits-people-pay-their-pasties).
Questions for HMRC to answer
- HMRC identified a 14% tax loss because of tax avoidance. What percentage of the tax loss is caused by each of these types of taxpayer?
- Individuals (employees and sole traders)
- Micro companies (1 to 9 employees)
- Small companies (10 to 49 employees)
- Medium-sized companies (50 to 250 employees)
- Other UK businesses
- Multinational companies
For a full definition of micro company, small company, and medium-sized company, see the European Commission's definition.
- Assuming that HMRC has authority to prevent tax avoidance, what will HMRC do to make sure that multinational companies pay the full rate of tax? (In section 3.1, the term 'the public' shows that HMRC plans to target individuals, sole traders, and possibly micro companies.)
- Will HMRC's efforts to prevent tax avoidance be in proportion to the tax losses from the different types of taxpayer?