'No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue'
Lord Clyde: Ayrshire Pullman Motor Services v Inland Revenue [1929] 14 Tax Case 754, at 763,764:
But some of these tax avoidance schemes are only legal because tax authorities do not have the number of staff needed to investigate and prosecute all of them. They use weird loopholes (which get closed, and which sometimes require repayment of unpaid tax) and bizarre corporate structures which only exist to avoid tax.
Tax avoidance has changed its meaning from normal tax planning to become that gray not-yet-regulated area near outright tax evasion.
There is a difference between something that is legal and something that is illegal but difficult to prove. You seem to be conflating the two issues.
They use weird loopholes (which get closed, and which sometimes require repayment of unpaid tax) and bizarre corporate structures which only exist to avoid tax.
If tax law were not so onerous and burdensome, there would be no incentive to crease these corporate structures and to manage business in such a way.
There is nothing legally or morally objectionable about using the rules, written by your adversary, to your own advantage.
a) the companies in question aren't lining their pockets, and
b) the politicians start to lose votes because of it.
That would appear to run directly up against the Ramsay Principle.[1] Specifically, if a company does a series of pre-ordained business transactions with no commercial purpose, specifically with the goal of reducing their tax burden, Inland Revenue can look at the whole transaction and assess payment based on what would have happened otherwise.
A similar case happened in the US with Gregory v. Helvering[2], with the out-of-context quote from Judge Learned Hand in the predecessor case (Helvering v. Gregory[3]) saying roughly the same thing as Lord Clyde.
[1] https://en.wikipedia.org/wiki/Ramsay_principle [2] https://en.wikipedia.org/wiki/Gregory_v._Helvering [3] http://www.leagle.com/decision/193487869F2d809_1591/HELVERIN...
That's the stated reason behind "know your customer" laws and international pressures to enact the same. However, once you have the information, nothing requires that it only serve that purpose...
If he had, would he have approved? I doubt it.
The U.K. passed legislation in 1925 that made it easier for individuals to use trusts to keep their financial affairs under wraps. Four years later, London courts ruled that Egyptian Delta Land and Investment Co. Ltd., which was registered in London and headquartered in Cairo, did not have to pay tax in the U.K., setting a precedent for future tax avoidance.[1]
[1]http://www.bloomberg.com/news/articles/2013-05-03/offshore-t...
I'm wondering if maybe there might be a correlation between unreasonably high taxes and tax havens? If the tax rate is reasonable, say 20-30%, then I probably won't bother trying to evade taxes myself and I won't have much sympathy with others doing it (greedy assholes!). However, if the tax rate is like 70-80%, then yeah, putting some money in a tax haven becomes tempting and I will have much sympathy with other tax dodgers.
At a certain point of earning lawyers and accountants (and shell companies) are cheaper, earnings are not direct and it's hard to make people pay their fair share (without making it difficult for smaller firms, etc)
Why is a percentage reasonable? Why not a fixed tax? Why have tax brackets at all as opposed to a smooth curve? Why should taxes scale proportional to income and not amount of services consumed or potentially thousands of other variables? Why should a pacifist pay for the military? Why should a pedestrian pay for the roads? Is it fair to use taxes to manipulate the incentives of consumers to they consume more or less of specific products (like corn and tobacco respectively)? Is is ethical to use taxes (or lack thereof) to steal businesses away from other states or countries? Should people who work in certain industries be taxed more or less? How about different tax rates based on age, race, sex, or gender as there's probably data to support different risk factors for different segments of the population. Should people who have been on welfare be taxed more to compensate? Should the tax rate be negative for certain income levels?
I have absolutely no doubt that you can answer all these questions relative to your own personal definition of reasonableness but there's no chance in hell any sufficiently large group will agree on any or all of these.
Of course, there are other things that affect whether a tax rate seems reasonable, too. For example, in a country where the difference between rich and poor is great, it might make sense to tax the rich more than in a country where the difference is small.
Would you like to get a $100 pay raise and get only an effective $20 pay raise? Would you bother working more for that?
People will always have a sense of fairness. And we're not talking about the very rich there (which usually pay a smaller effective rate), we're talking about people with high earnings, but usually not millionaires.
It seems that you're beginning with the assumption that the expenditures are all sensible or necessary, thus the "need" to make up the revenue. To be sure, a deficit is a deficit, but when we start talking about people paying their "fair share", they're probably going to want to know, "fair share of what, exactly?" If politicians keep spending themselves into debt, regardless of how much more money they extract from the population, can we speak of one's "fair share" of the irresponsibility of the people holding the public purse?
If the taxes not paid creates increased growth then tax will simply be made up in the future.
Imagine two countries each with a $1000 economy, both have a 50% tax rate, but in one country every person 'dodges' 50% of their taxes, if that country grows its economy at say 3% instead of 2% then after 100 years two economies will be at $7,386.22, $20,068.17 thus the country with the tax dodgers will collect ~$5K in revenue while the other collects ~$3.5K
http://www.financialsecrecyindex.com/introduction/fsi-2015-r...
...Something I think the journalists should have done in the story, btw.
If you putz around with their servers, you can get access to their 'source' material: http://www.financialsecrecyindex.com/database/USA.xml insert any given country + xml, you should be fine. I have an archive I just wget'ed that I'll SCP to one of my servers in a bit.
http://www.cbc.ca/news/politics/federal-pension-board-used-o...
There is a HUGE financial incentive to find alternatives and a simple example would be cryptocurrencies.
