The government designs a tax system of such labyrinthine complexity that inevitably loopholes exist everywhere.

Tax experts know this and quite understandably exploit the government’s decision – as would almost anyone given the chance to keep more of their own money.

But who do we blame?

The government who laid out the rules, or the people who followed the rules?

The government designed the damn system, so put the blame firmly and squarely at their doorway.

The best way to solve the “problem” is to simplify the tax code to something closer to a flatter tax rate for everyone and everything. It’s already been proved that it works in other countries and actually results in more tax revenue at a lower overall rate as the exploits no longer exist for rich people to pay clever people to exploit.

There are 3 concepts, (1) tax compliance; (2) tax avoidance and (3) tax evasion. Out of the 3, one of them is illegal. For those incoherent idiots who talk about morality in paying more taxes than what is legal, I look forward to you giving up all your salary except the minimum wage to the tax authorities.

As for total loss to the tax coffers, erm, how can it be a loss when your estimate of tax take is based upon what our laws will provide for? This is like saying, we could raise our taxes to 70% so because people are not stupid idiots for paying their taxes up to 70%, the state is suffering a loss.

And to think you guys actually put up this illiterate populist incoherent drivel on your website.

I started working as an accountant in the dying years of the last Tory government. I remember our induction pep talk from the senior partner, postively drooling over the prospect of a Labour government – all those new taxes and new regulations meant lots of fat fees for accountants.

Ianvisits above has it right. Tax lawyers love Labour.

Everyone in the UK is AVOIDING payment of 100 percent tax rates every day of every year.

Excellent point bd!

You can’t lose something you never had to begin with………

Simplification of the tax code does not necessarily mean a “flatter” rate, i.e less progressive taxation. The only argument for the present kind of system is that the government doesn’t actually want a progressive code, but wants to appear to be implementing one. Sounds very NuLab to me.

Of course, there can be no argument against a higher tax rate for people who use accountants. Or indeed for taxing accountancy income at punitive rates…

From FT Alphaville comments:

The documents themselves cast severe doubt on the judgement of Barclays’ management.

Apart from HMG being Barclays’ lender/insurer of last resort, HMG is also a major client or potential client. The documents seem to show Barclays’ management dealing with HMG in very dubious faith. To allow any appearance, internal or external, of less than good faith in Barclay’s dealings with a party so important to them is, prima facie, inconsistent with management in the interests of Barclay’s as a company. This is something (more) which should worry every important shareholder in Barclays.

The distinction, perhaps a fine one, between the Barclays’ cases and the Guardian one appears to be that Barclays devised the schemes for the bank’s profit, while the Guradian mangement were content that their enterprise should profit indirectly from a scheme devised by and for their partners. It is concievable that the Guardian mangement had a duty to their shareholders to accept a legal scheme from which the company benefitted. It is very hard to construct a case for the Barclays’ management having a duty to their shareholders to design and initiate the schemes described in the documents.

For those incoherent idiots who talk about morality in paying more taxes than what is legal

Who’s doing that? The problem here is two-fold: that Barclays is finding and exploiting complicated loopholes to help customers avoid paying taxes that they’re supposed to. What they’re doing may not be illegal, but it is certainly unethical and puts even more strain on ordinary tax-payers.

In effect, we’re all paying for Barclays to help its customers avoid paying taxes.

As for total loss to the tax coffers, erm, how can it be a loss when your estimate of tax take is based upon what our laws will provide for?

Because if they pay their taxes, then taxes for the rest of us would be lower. Right now they’re high precisely because of these schemes devised by Barclays.

I find it hilarious that right-wingers are ready at any opportunity to excuse rich corporates avoid paying their taxes, while complaining about high taxes on everyone else.

Sorry, Sunny, but there is nothing right or left wing about paying more taxes than what is required by law. Its just stupidity. That’s what is called as tax avoidance, there is a legal tax system. You are asked to pay “x” amount, why would you actually pay more than that?

Complicated or simple, the concept remains the same. If I do not take up my tax allowances, then I am being simple?

Finally, they ARE paying their taxes. They are NOT paying more tax than necessary. If you want to pay more tax, by all means, go right ahead. But if the government wants more tax, then it puts up more laws to get more tax.

I also am utterly gobsmacked at your assertion that taxes are high because people avoid paying more tax than what is legal. That simply does not compute on logical or economic grounds at all.

I am very surprised that the difference between tax evasion or tax avoidance isnt clear to you. Hilarious? I think not. Its rather sad, but that’s fine, as I said, incoherence.

But as i said, it is not illegal, but I would love to hear why people who are talking about ethics or morality are not paying all their income over the minimum wage? That’s ethical, right? and moral according to their standards, yes? And?

BD, have you heard of the concept of adhering to the spirit of the law, rather than the letter? Do you disagree that people should, as a general rule, follow legal and moral guidelines, or do you think that anything is fine as long as you can find some sort of semantic loophole to justify it?

Or to put it another way, do you think Bill Clinton wasn’t being unethical and dishonest when he said “I did not have sexual relations with that woman”, because what he said was technically true from a certain point of view?

Nobody wants to pay all their money in tax. But some people don’t resent paying the amount of tax the government asks them to pay, so that the country will be provided for, and other people don’t suffer because of their selfishness. (Whether they agree with how the government spends the tax money is an entirely different argument, because it’s not the government that suffers from your tax avoidance.)

BD: Finally, they ARE paying their taxes. They are NOT paying more tax than necessary. If you want to pay more tax, by all means, go right ahead. But if the government wants more tax, then it puts up more laws to get more tax.

There’s two responses here, in addition to what Pickwick already mentioned above. Firstly, they are NOT paying the taxes they are obliged to. So for example, if the government stipulates that corporates pay 20% tax on profits, then these companies are basically laundering their money so that profits look lower, or classified as something else, and thus avoiding the tax they should be paying if they money wasn’t cycled through various accounts all over the world.

Secondly, its these sort of hidden schemes, lack of accountability, transparency and clarity of what’s going on in our financial system that has brought us into the brink of financial disaster (averted by taxpayers, not these so-called wizards). For that reason too they should be exposed and shut down. If your bank went bust, along with all your savings, just because a few wizards over-stretched themselves while laundering money through various channels, you’d be asking for more accountability and transparency too (which is what I’m doing).

I also am utterly gobsmacked at your assertion that taxes are high because people avoid paying more tax than what is legal. That simply does not compute on logical or economic grounds at all.

It’s quite simple. Assume that the govt spends 100 a year on services. Assume that more and more corporates manage to avoid paying taxes through elaborate schemes conjured up by Barclays, and thus govt income falls. It can then increase taxes on people (hurting them) or reduce the services it provides (hurting people). Either way – we pay for Barclays helping other corporates avoid paying tax – legally or not.

Hope that makes sense.

Its a travelling week this one so wouldnt be able to respond (if at all), Sunny and Pickwick.

The idea of tax avoidance has been enshrined in our legal books for well over 40 years. Incessantly the revenue chaps and others have asked our law lords to opine whether tax avoidance is illegal. (if i get a chance and if you so want it, although you can search as well, you can find the relevant cases in our law, american law, european law and and and)
And ever since, they have said a categorical no. Spirit of the law is fine for conversations but does not make much sense in having a law abiding society. It is a foundation of our society that retrospective punishment is not given, our laws are transparent and if somebody feels that that have evaded taxes, take them to court, but tax avoidance within our laws, is perfectly legal. If we are indeed talking about the spirit of the law, then why on earth is the government using the tax policy to influence social policy and why do we utilise our tax deductions?

Sunny, they ARE paying their taxes that they need to pay legally. If not, they are doing tax evasion. If they do things which help them avoid taxes legally, that’s perfectly fine and possible and and and.

as for complexity, lets not start that argument because complexity arises from complex tax code. Simplify it and structures will follow but this incessant tinkering with the tax code by successive government has now created a behemoth which is byzantine in complexity. But that is again nothing to do with tax avoidance. Even if you had a simple flat tax and somebody found a legal way to avoid paying that, then its the fault of the government. No court in this world says anything about complexity. So asking for accountability and transparency is fine, but why look at the demand side, its not the populace who asked for a complex tax code, did they?

The government has full freedom to levy taxes, corporates and individuals have to comply. If they want more funds, then they can levy more, as simple as that. If they do not want people to leak monies, then they would simplify the code and remove the deductions. Make it very clear. See how the eastern europeans or isle of man have implemented their tax codes.

Government income through taxes will fall when you increase them beyond a certain level, well known economic phenomena.

So no, tax avoidance is perfectly legal and this is a law abiding state. The idea of a court of public opinion, ethics, morals and the like, good for the newspapers but very bad for the country as a place for investments, we have developed a fine body of law going back hundreds of years. Its not based upon varied feelings.

“If it’s legal, it must be ethical” was an idea I adopted when I was 15 and abandoned when I was 16. Of course, I don’t mean to imply that BD or anyone else is ethically adolescent…

Basically, Sunny believes “from each according to their abilities, to each according to their needs” and BD doesn’t. Presumably BD doesn’t understand what Homer was banging on about when he described Achilles sullking in his tent, either.

In truth, each of the three major political philosophies in our society is associated with a besetting sin in resepct of which it has a kind of moral blindness. For the left, it’s jealousy; for MacIntyrean conservatives it’s fear and for neo-libertarians it’s greed. It may even be that each of us is atracted to whichever political philosophy is most excusatory of the particular sin which we find most seductive.

Companies (can we not use “corporate” as a noun please!) cannot pay tax. Only people can pay tax. The tax levied on companies is paid by a combination of owners through lower profits, customers through higher prices and employees through lower wages.

The more complex the system – I believe the size of the definitive “Tolleys Tax Guide” has more than doubled under bungler Brown – the more scope for avoidance.

Perhaps Sunny volunteers more to the taxman than necessary, but I don’t and I don’t see why Barclays should either.

Of course companies can pay tax – just as they can be sued as bodies corporate in law.

CJCJC seems to think that tax represents a cost without any corresponding benefit. A company may well be very happy to pay tax which is spent on infrastructure which enables it to trade more effectively, or indeed on benefits which enable its directors to offload staff without fear that they’ll starve…

The company may be the enitity which notionally pays the tax, but the *cost* can only be borne as I said by owners, customers and employees.

SCM guys would get fee income each year for the duration of the bond

Er, yes, because they’re tax accrual deals. The more payments, the more tax avoided, the more money made. Nothing clever going on there.

they went to the client, drew the structure on a whiteboard, and rubbed it off

Possibly for the reasons you mention, but commonly because they have thought of a dozen different forms the trade could take and want to briefly discuss with the client before suggesting something. A pitchbook usually follows.

the article I read on the Guardian doesn’t emphasises that the SCM teams aim was not to save Barclays tax income, but to save clients tax income

That’s because, I’m afraid, this statement is rubbish. Read the docs.

To give an idea of how the deals straddled the regulatory borderline, when some SCM guys pitched a deal to one of our clients, apparently they didn’t bring any pitch books or any printed material. Instead, they went to the client, drew the structure on a whiteboard, and rubbed it off, making sure there was no trail that the tax authorities could follow. Emphasis – not illegal, just avoidance, but still morally dubious.

Are you sure that’s why they did it? To me it reads more like they didn’t want to reveal too much about how they did things, in order to prevent a putative client from implementing their scheme without paying them.

All the reasons given for being careful in what gets written down are valid – although it’s very tricky to look at the documents leaked and figure out where the tax saving actually is, you can be sure that any presentation would have been much more explicit.

That said, as HMRC’s powers to request written documents are rather comprehensive (pretty much subject only to legal privilege, and as obvious as this sounds, the ability only to request those documents actually prepared), the necessity of taking care in ones documentation is one of the soft skills drummed into any tax advisor’s head from an early stage in his career.

Um… Way to go with the defamatory headline fellas. The article identifies a series of ways in which Barclays avoided tax. Clever, morally dubious but strictly legal ways – as the chap says

Emphasis – not illegal, just avoidance, but still morally dubious.

That’s not tax evasion. That’s tax avoidance. Clear distinction there, and it’s not always a good idea to accuse people of being criminals, what with that whole libel thing going on.

Indeed, the tax system is sometimes very complex, much more complex than it should be.It`s a pitty.