Wednesday, 4 July 2012

Tax avoidance is not morally wrong its sensible

If high earners avoid paying tax legally who really has the right to comment on it. If you have broken no law then why not, if you have worked hard be able to without reproach do what you can to minimise your tax liability...

Is the problem just that many people are simply jealous that a very few people earn a lot of money?

A person using the K2 tax scheme may have the ability to reduce their income tax bill to only 1% however if that person is earning £3m per year they are still paying over £30,000 in income tax. That's a huge amount of money, more than most people earn...

If I earned millions then I would do what I could to reduce my tax bill, I think most people would do exactly the same if they were in that position. Its got to hurt when nearly half your earnings go in income tax. Is it right that someone should have to pay £1.5m from their earnings of £3m. Ouch!!!

When does tax planning become "morally wrong"?

If over the past 20 years you had saved into a PEP / ISA by now you could have amassed a sizeable pot of money; using very simple maths that could be possibly somewhere around £250,000.

Income from ISAs can, depending on where / how it is invested, be tax free meaning that £250,000 could produce an income of somewhere around £12,500 per year probably more, potentially, tax free. Is that morally wrong? A person could life for the rest of their lives (albeit frugally) without paying any more income tax!
Using an EIS type investment could reduce your income tax bill dramatically, in some instances meaning that you pay less than 1% income tax. EIS investments are broadly open to most people so is that morally wrong?

If a person reduces their income tax bill from £6,000 to nil is that more or less morally wrong than someone reducing their £1.5m income tax bill to a mere £30,000.


There is something else which is rarely mentioned when people are banging on about tax dodging high earners. How much do they generate in VAT and other taxes? If I had avoided the majority of a £1.5m income tax bill then I am more likely to go out spending my money which generates tax in other ways!!!

To buy a new Mercedes Maybach 62 will cost somewhere around £350,000. Included within that figure is around £60,000 in VAT and Road Tax. Let's not then forget these cars cost around 50p per mile in fuel!!!!!!! 32p of which is fuel duty and yet more VAT.

I assume that if you have the money to afford the car in the first place you probably aren't too worried about keeping your journey's to a minimum. 20,000 miles would therefore add a further £6,400 in fuel duty (incidentally that is more than most people pay in income tax).

This is just a small and silly example but we are taxed heavily in this country and for that we receive amongst other things free education for our children and free medical care through the NHS. Need I point out that many high earners (if not close to all) will privately educate their children and use private medical facilities; all of which cot money and will produce tax revenue.

Finally, lets not forget that many of these people earn their huge amounts of money by being the titans of industry we so desperately need to drag us out of recession, or maybe they are just comedians that entertain the nation therefore earning their money from television or by packing out theatres the length and breadth of the country, all of which generates a flow of money and therefore tax revenue for HMRC...

So, lets not berate the wealthy for being clever with their tax affairs because in many cases we benefit from them, their businesses or the tax they pay in other forms which help pay for the public services we use and they don't...


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