Can someone please explain me what exactly happened and why this is wrong?
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It's moral outrage (election) season.
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Basically, HSBC allowed UK people to have accounts in the Zurich High Strasse Branch.
Nothing to see here, move along.
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It's one political party whose leaders use legal tax avoidance methods complaining about others who use other methods of tax avoidance: some of which is illegal.
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Artificial constructs. Personal accounts transformed into shielded exempt from scrutiny corporate accounts through "transubstantiation.com" aka HSBC personal bank. Very handy for drug barons bankers and their friends.
Last edited by: NortonES2 on Wed 11 Feb 15 at 19:16
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A naive person might ask why a non-Swiss would have a Swiss bank account, if not for tax evasion.
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>> A naive person might ask why a non-Swiss would have a Swiss bank account, if
>> not for tax evasion.
Stability of the Swiss Franc? A home in the Alps?
Last edited by: Zero on Wed 11 Feb 15 at 19:39
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Ed Miliband might have gone a bit too far it seems:
tinyurl.com/oglm2fz
although some say differently.....
order-order.com/2015/02/11/stanley-fink-to-ed-miliband-bring-it-on/
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I keep thinking that the media are attempting to confuse the hoi polloi on the distinction between tax avoidance, which is just common sense and having an accountant, and tax evasion which is often illegal. The terms are used interchangeably in broadcast and print media and seldom clearly explained.
Hacks don't get that sort of thing wrong by accident. With certain phrases though they are sometimes - not often but sometimes - under orders. 'Why?' we whine when we are butchered. But the editors just say any old thing. They too have their problems from above.
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I did know what I was writing, too. But the line has been blurred, since Gordon Brown said more or less that if your tax avoidance depends on a "wheeze" (as the schemes peddled by PWC, Deloitte, E&Y etc are known) or other loophole that is clearly an artifice designed to avoid tax, then HMRC could deem it evasion and go after it anyway.
Hence there have been quite a few people and firms who have had charges levied by HMRC when their accountants had told them they would be paying less.
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" their accountants had told them they would be paying less." Indeed, and for a hefty fee, and little chance of being brought to account. Smoke and mirrors which they get away with because the HMRC are understaffed and under-resourced.
Last edited by: NortonES2 on Wed 11 Feb 15 at 20:53
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I have never had any qualms with those who seek to pay no more tax than required compared to those who seek to avoid such payments.
Last edited by: Stuartli on Thu 12 Feb 15 at 00:35
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Trying to stigmatise avoidance rests on very dodgy moral ground.
All governments encourage tax avoidance - it's just that at election time they call them incentives.
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Some of the players are avoiding tax, but many are using fabulous constructs to evade tax. Given HMRC coyness/timidity it's hard to tell who has genuinely avoided, and who has set out to evade.
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>>but many are using fabulous constructs to evade tax.
No. Fabulous contructs avoid tax. Some of them don't work, in which case the tax is due.
Tax evasion is the result of dishonesty.
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As I understand British people can open accounts outside UK. So how these people avoided or evaded tax?
We may argue that if these people had that amount of money in UK, they would have forced to pay taxes on the savings interest.
But unlike USA, a British citizen does not have to pay tax in UK unless it was earned in UK.
So where is the problem?
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>> As I understand British people can open accounts outside UK. So how these people avoided
>> or evaded tax?
They might not have. But for example:-
Some of them may have been paid undeclared amounts and just hidden them.
Others may have earned money in the UK and had it paid directly to their Swiss account.
I do occasional work for a company based in the USA. I bill them in dollars and they pay to my nominated bank account. I declare my income (or my company does) and pay the tax on profits. Perhaps if I could persuade a Swiss bank to open an account for me, I could have the payments sent there, and neither the Swiss bank nor the American client would tell HMRC?
Where serious money is concerned, the structure is likely to be much more complicated and involve multiple companies in different domiciles.
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>> I do occasional work for a company based in the USA.
Aren't you liable for tax in USA then?
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>> >> I do occasional work for a company based in the USA.
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>> Aren't you liable for tax in USA then?
I haven't enquired into that! I do the work here, I get paid here, I pay tax here.
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But unlike USA, a British citizen does not have to pay tax in UK unless it was earned in UK.
It's true an American citizen is liable for tax on any overseas earning, but the statement is not wholly correct for UK citizens. If you are domiciled in the UK, like most of us, you are liable for tax wherever your money was earnt. But as a lot of overseas banks don't report to the Inland Revenue, pretending you have no overseas income is easy, one just lies. And if you get caught, big fine time.
Quite a lot of foreign earnings are taxed by the country in question and there is a complicated arrangement of tax treaties whereby some or all of the foreign tax paid is offset against the UK tax.
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>>No. Fabulous contructs avoid tax. Some of them don't work, in which case the tax is due.
>>Tax evasion is the result of dishonesty
I think the principle that Gordon Brown was seeking to establish was that if tax planning included fabulous constructs or obvious artifices, then the tax so avoided should be payable. The distinction between that and evasion is that you can get sent to jail for evasion, whereas if your fabulous construct doesn't work then the worst that should happen is that you have to pay the tax.
For obvious reasons, this is hard to enforce; HMRC might not even know about the fabulous construct. When they do spot it, inevitably you will have HMRC taking a position that more tax should be paid, and a taxpayer with counsel's opinion that it is legal avoidance. Commonly there is a test case and a judgement resolves it.
It has also resulted in a fair number of "deals"; taxpayer says no tax due, HMRC says £n due. HMRC offers to accept <£n, with the proviso that the taxpayer will desist from future "fabulous constructs" or wheezes as they have become known.
These deals themselves create scope for cronyism and corruption, in my opinion.
A large part of the problem is the sheer volume and complexity of tax legislation. It would have been surprising if an industry had not grown up based on finding loopholes.
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Setting up a corporate identity, where the reality is that the beneficiary is an individual is more than a wheeze. It is untrue. Therefore evasion. GB must have been soft in the head if he gave leeway to the dodgers.
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An addendum. Setting up a corporate identity, where the reality is that the beneficiary is an individual is more than a wheeze. It is untrue.
Other schemes which HMRC has examined are similarly flawed but sold on the basis that tax will be reduced, on the basis of absurd propositions. Such as the "self-employed" status of people working for large corporations. There are a number of tests that can be applied to help decide employment. Whether, for example, the individual has an investment in the purported business, the exposure to risk, the directing mind, the ability to act autonomously of the corporation etc etc.
Therefore evasion, not avoidance because the house is built on sand. GB must have been soft in the head if he gave leeway to the dodgers.
I can understand HMRC not wanting to take these issues to court, because it is strapped for cash and resources. They are dealing with power, and have little support from HM Government.
The forces against HMRC are formidable and I suspect, some are ruthless.
But it is only now, when the sticky stuff has hit the fan, beginning to talk about brigading other agencies to help address the destabilising effects of slack, due to non-enforcement, and failure to pursue criminality. This may give them some support.
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>> An addendum. Setting up a corporate identity, where the reality is that the beneficiary is
>> an individual is more than a wheeze. It is untrue.
Why? On that basis, every business owned by more than one person should be a partnership too.
Operating as a company saves me a bit of tax (NI actually) but also gives me limited liability. It also means less hassle from companies I work for, who don't want to deal with individuals as ad hoc consultants because it potentially puts them on the hook for employers NI etc. Dealing with me as a company means any IR35 issues (based on me being an alleged employee rather than an independent supplier) with HMRC are on me.
There is incidentally no artifice in my status; typically I only do a few days work spread over a longer period, have no contracted hours or regular place of work, and I operate autonomously.
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There are many instances, which I alluded to, where the contract is a contract of service in reality. Without wanting to get into personal circumstances I was thinking of the high earners who, whilst under the control/direction of a management structure pretend, for tax purposes only, that they are independent. Perfectly possible and legitimate(!) to set up a company, where the trader operates under "contract for services" arrangement, as many consultants do.
Last edited by: NortonES2 on Thu 12 Feb 15 at 14:59
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>> There are many instances, which I alluded to, where the contract is a contract
>> of service in reality.
Ah, you're thinking of senior executives at the BBC for example. Sorry. I don't know that it happens so much now, but maybe it still does, further from the public eye.
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>> >> There are many instances, which I alluded to, where the contract is a contract
>> >> of service in reality.
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>> Ah, you're thinking of senior executives at the BBC for example. Sorry. I don't know
>> that it happens so much now, but maybe it still does, further from the public
>> eye.
..................or higher up the food chain.
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>> Given HMRC coyness/timidity it's hard to tell who has genuinely avoided, and who has
>> set out to evade.
HMRC is neither coy nor timid, they can only act within the tax laws as they are written. No country has yet managed to make fit for purpose tax laws that align and control financial and commercial globalism. Financial globalism that is now available to ordinary tax payers.
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> No country has yet managed to make fit for purpose tax laws
>> that align and control financial and commercial globalism. Financial globalism that is now available to
>> ordinary tax payers.
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That's because they have failed to realise that taxation is no longer susceptible to local control.
Taxation is simply a necessary and unavoidable cost input for existence, but just like any other commodity it no longer has to be purchased exclusively from within the country of residence.
If coal, labour, oil, taxation, or anything else can be obtained more cheaply somewhere else, then the market will shift accordingly. Countries have to recognise which inputs they can offer most competitively, and stop moaning about the ones they can't.
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I do think that part of the problem is that "ordinary folk" usually pay their dues without any ability to reduce their tax burden, even if they had the desire to.
So it rankles a bit when someone who already has squillions uses (what's perceived as) dodgy means to even further reduce their tax liabilities, and are given tax breaks not available to all, which serve only to further increase their wealth. Especially when there are so many people at the complete opposite end of the scale, in or close to poverty, and public services are creaking.
"Immoral" doesn't break any laws, so it's good fodder for headlines but not of much use for anything else.
It must be impossible for watertight legislation in the days of global banking and operations, especially when there is a well-financed army of experts engaged solely to identify the loopholes.
Did anyone see the programme on the super rich a few weeks back? Slightly slanted presentation but one premise was that successive governments conceded tax breaks as it was thought that the benefits to the super rich would trickle down to the rest of the population, but this has now been shown to be not the case. See en.wikipedia.org/wiki/Trickle-down_economics for the theory.
EDIT: 9 more days on iPlayer
Episode 1 www.bbc.co.uk/iplayer/episode/b04xw2x8/the-superrich-and-us-episode-1
Episode 2 www.bbc.co.uk/iplayer/episode/b04yn2yq/the-superrich-and-us-episode-2
Last edited by: smokie on Thu 12 Feb 15 at 13:25
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Taking a car on finance to achieve certain benefits and then legitimately cancelling the finance to avoid charges yet retain the benefits seems to be legal, within the terms of the offer, well understood and acceptable.
Perhaps someone could explain to me the difference between that and tax avoidance?
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Perhaps someone could explain to me the difference between that and tax avoidance?
There isn't any! Both are legal, but tax evasion is another matter. And the line between evasion and avoidance can be a tenuous thing. As a rough rule, the more convoluted an avoidance scheme is, the more likely it will be declared evasion.
Minimising ones bill is one thing, but doing so by lying is not good...
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Lets assume that even Daily Mail readers know the difference between avoidance and evasion, then what are they upset about?
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>> Lets assume that even Daily Mail readers know the difference between avoidance and evasion, then
>> what are they upset about?
Well as the Inland Revenue and their masters can't fully legislate the difference, lets not assume anything about daily mail readers. Except maybe they think its the fault of the immigrants and the EU.
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>> even Daily Mail readers know the difference between avoidance and evasion...
What difference?
My OED:-
Avoid: to escape or evade.
Evade: to avoid or escape from.
They are two words having the same or a similar meaning.
It is HMRC that has decide that the two words have different meanings.
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>> It is HMRC that has decide that the two words have different meanings.
The differentiation in terms of legality is of long standing and I suspect there is judicial authority for it going back probably to seventies or earlier.
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en.wikipedia.org/wiki/Tax_noncompliance#United_Kingdom
I like The difference between tax avoidance and tax evasion is the thickness of a prison wall (Denis Healey).
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Strictly speaking, avoidance is trying to get out of paying but says nothing about any obligation, whereas evasion implies one was supposed to pay, but one is trying not to.
It's a very fine line, but not one I have a major problem with.
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>> They are two words having the same or a similar meaning.
Similar but not the same. As many a jailbird/triumphant rich bloke could tell you.
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In a spirit of helpfulness and co-operation, here is a thought! (Not mine)
Troll alert :-)
en.wikipedia.org/wiki/Taxation_as_theft
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Swiss HSBC - Roger.
