Friday, August 20, 2010

Divided we stand - the UK government's conflicted position on tax avoidance

Two articles in the Financial Times this week point to possible divisions of opinion within Britain's coalition government on tax avoidance.

The first relates to concerns among Liberal Democrats, the junior coalition partners, over the appointment of retail magnate Philip Green as adviser on public spending efficiency. Green, whose flamboyant lifestyle stands polar opposite to the low-income households who will bear the brunt of spending cuts, caused considerable controversy in 2005 by paying his Monaco-resident wife a £1.2 billion tax-free dividend. Scarcely surprising then that Liberal Democrat members of parliament are restless about the signals that his appointment sends out at a time when the coalition government is trying to shore up its claims to be promoting "fairness" (a word rapidly becoming worn out by over-use).

The second article reports that Her Majesty's Revenue and Customs have decided to take a "less combative approach" in their dealings with corporate tax avoiders. The argument goes that this stance is "designed to cut a mounting legal logjam and unlock billions of pounds tied up in court battles over avoidance", but in conversation with this blogger one senior revenue officer claims that the change reflects the Conservative Party's proximity to big business, which came under increased pressure from the previous administration to pedal backwards on aggressive tax avoidance.

Green's appointment and the softer message on corporate tax avoidance suggest that, whatever the rhetoric, the government intends to be soft on tax avoidance and soft on the causes of tax avoidance. As the red ink spreads across British public finances in the coming years, this matter is likely to become a major faultline within the coalition.

1 Comments:

Blogger Physiocrat said...

This is about what one would expect. Let the big fiddlers get away with it and clobber the so-called benefit scroungers, a process that began with NuLab's "Report a fraudster" telephone hotline, an idea borrowed from the Gestapo.

Incidentally one form of tax avoidance that is passing uncommented is the practice of demolishing industrial buildings to avoid business rates.

8:52 am  

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