There has always been a distinction between tax avoidance and tax evasion. Tax evasion is the illegal evasion of tax by deliberately misrepresenting their true affairs to the tax authorities, usually either by dishonestly understating or omitting income or by overstating or inventing expenses. In comparison, tax avoidance is reducing the amount of tax that is payable by means that are within the law.
In a recent poll by YouGov 59% of the respondents said that tax avoidance was morally wrong. 84% said that they had never taken part in tax avoidance, and 63% said that they would never do so. This raises a very interesting question.
Elsewhere in this newsletter we draw you attention to the new Married Allowance being introduced in April, providing an opportunity for many couples to reduce their tax by up to £212. Registering your interest and making use of this allowance is tax avoidance. Are the 59% against this?
Elsewhere in this newsletter we draw your attention to the use of ISAs and pension contributions to reduce tax. Putting money into an ISA or making a pension contribution is tax avoidance. Are the 59% against this?
We have previously written about the new AutoEnrolment legislation which is increasingly affecting us all. This is where the government is effectively forcing everyone to contribute into a pension scheme and, therefore, to take part in a tax avoidance scheme.
Tax evasion is wrong – we all agree on that. However, the current furore against tax avoidance is a direct consequence of the inability of the government to effectively legislate against tax evasion. One thing is certain – we all want certainty when dealing with our tax affairs. But that certainty cannot be achieved by trying to make some moral distinction between “acceptable” tax avoidance and “immoral” or “aggressive” tax avoidance. It is for the government to better draw the distinction between tax evasion and tax avoidance. If it’s legal then it is legal. If it is too aggressive or unacceptable then it is up to the government to make it illegal.