The Public Accounts Committee (“PAC”) is a cross-party body of MPs who review various aspects of policy and its implementation. It has recently published a report on “Tax Reliefs” which highlighted a number of factors:
- A total of 1,128 different tax reliefs leads to a very complex tax system
- Despite a pledge to simplify the tax system, since 2011 the government have introduced 134 tax reliefs whilst abolishing a mere 43
- Each relief creates opportunities for avoidance and evasion
- The government spends £101bn on tax reliefs
- As well as being substantial and complex, tax reliefs are a “poorly managed element of the tax system”, and HMRC cannot be fully vigilant and knowledgeable about the “scale and value of different types of relief”
Much of this is fact and no-one can argue with it. However, there are a couple of things above which must surely be challenged.
Firstly, once again there is the combination by the authorities of tax avoidance with tax evasion. Tax evasion is cheating and is illegal. Tax avoidance is the act of ordering your affairs in such a manner as to minimise your tax liability and this is legal. There is absolutely no law in this country which states that you must pay either the maximum amount of tax, or even the “proper” (whatever that means) amount of tax. Aggressive tax avoidance? Simple. If so called tax avoidance falls outside of the tax law, as was the recent “Take That” case which we recently commented on, then this is not tax avoidance but tax evasion and is quite properly stamped upon. However, it is about time that government and public bodies such as HMRC stopped trying to demonise tax avoidance.
Secondly, we find the idea that the government “spends” money on tax reliefs quite bizarre. This clearly indicates the government’s perception that everything belongs to them and if they decide not to take it then this is a “cost” to them. It must surely be that nothing belongs to the government, but we simply lend them a proportion of our income to meet certain mutually beneficial expenses on our behalf, even if there is some dispute about what those expenses are.
Important? We think so. No-one should be criticised for not paying “too much” tax!