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To Evade or to Avoid, That is the Question…

In by Sam on September 22, 2010 at 20:06

rior to their current stint in government the Lib Dems were known, often unfairly, for coming up with some pretty blue skies policies – ideas on the zany side oft attributed to the low probability of ever being able to enact them. Critics of the party may feel like we’ve slipped back a few months – back to the glorious days of in-actable promises.

One of the main announcements made at the parties Liverpool conference, which ended today, was Nick Clegg’s promise to balance out the purge of ‘benefit cheats’ by going after tax avoiders.

Tax avoidance is an interesting ‘crime’ – mainly because its perfectly legal (as opposed to tax evasion which is very much illegal) – put simply its making sure you pay as little tax as possible. In fact this ethical crime requires you to follow tax legislation to the letter, admittedly, to find the loop-holes within it. This is also the reason why it is a bit unfair and “unethical”, paying the accountants and tax lawyers to find the cheapest way to pay tax is expensive, making tax avoidance a pass-time for a few in the middle classes and virtually all of the super-rich. For those at the lower end of this scale it normally means re-jigging family finances arrangements to avoid paying a few pound (i.e. paying family members or buying items VAT free through a business – we’re not talking anything offshore). This is more the equivalent of those reliant on benefits making sure they are claiming the maximum they are entitled to than cheating the system.

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It is this low-key tax avoidance that Clegg’s proposed changes to the tax laws will make harder – not the much more sophisticated and convoluted tax avoidance schemes that millionaires and billionaires indulge in and that he hopes will earn the Treasury big bucks. Loop holes will always be found in any law and making tax avoidance harder is not going to entrap those who already have huge budgets to spend on the legal and financial teams expert at squeezing their way through smaller and smaller loops holes meaning the treasury will never get the millions he promises while life gets harder for a middle class already feeling cash-strapped.

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