Friday, April 24, 2009

Britain's budget - tax sea change

A truly important element has emerged in Britain's budget. The eye-catching part of it was the 50% tax rate on the seriously rich. But, as Ann Redston points out in the Guardian, this wasn't the most radical element.

"For the first time, HM Revenue & Customs (HMRC) will "name and shame" those who have deliberately underpaid significant amounts of tax, when this is later found to be legally due. For the first time, too, those responsible for the tax affairs of large companies will become personally liable for careless or deliberate underpayments. And waiting in the wings is the possibility of financial and other sanctions against non-compliant tax advisers."

This follows the remarkable step that Britain's government has in attaching the word "avoidance" into the list of worries it attaches to Britain's tax havens (though this was followed by a retrograde step). Crucially, Redston adds:

"These new approaches are only viable because of widespread UK support for a more rigorous regime. If taxpayers regarded avoidance and evasion as a national sport, naming and shaming would fail: being on the HMRC list would be an accolade, like having an ASBO on a run-down housing estate. These new approaches are possible because people generally pay their taxes, and resent those who do not."

We are not named in this article but we know we have played a central role in this: we certainly helped get the Guardian interested in the first place. Its excellent Tax Gap series has been profoundly important in Britain.

"Its thesis was that structured, artificial avoidance breaks the unwritten norms of our society – such as honesty, straightforward dealing, and fairness. It is thus unacceptable, and deserving of vilification. Many people agreed, endorsing the Guardian's campaign. This may in turn have encouraged government to adopt a more radical approach."

The budget documents also include significant new measures to tackle cross-border tax evasion, following the G20 summit earlier this month. Banking secrecy, tax havens, and transparency in tax affairs: these were all watchwords of the Tax Gap series, and of TJN's six-year campaign. The same themes are reiterated in the list of changes set out in the budget red book.

And we very much like this:

"There are other reforms too. Those who create tax avoidance schemes already have to notify HMRC, and explain how the schemes work. But disclosure alone does not prevent avoidance: people may be reassured by the scheme's creators that the arrangements are legally effective.

HMRC may disagree, but the taxman currently keeps the schemes, and their flaws, confidential, until the government either changes the law or the arrangements are challenged in court. This is likely to change: HMRC are planning to publicise the schemes they believe breach existing laws. This will reduce the appetite for artificial arrangements: only the brave or foolhardy will take the risk."

See the details here.


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