Tax Avoidance
There is a very clear distinction between tax avoidance and tax evasion from academic publications. Tax books have defined tax avoidance as “the lawful minimization of tax liability through sound financial planning techniques, while tax evasion is the “unlawful attempt to minimize tax liability through fraudulent techniques to circumvent or frustrate tax laws”. The consequences of either action are also clear. The former is not punishable by law while the latter is. However, the lines between evasion and avoidance have become blurred between the government and the general public.
In an academic publication, tax revenues are denoted as “the lifeblood of the social contract, vital to the development and maintenance of physical infrastructure and to the sustenance of the infrastructure of justice that underpins liberty and the market economy” (Hutton, 2002:75). However, it seems that the majority of multinational corporations have been structured in such a way that enables and promotes tax avoidance in its operations. Christensen and Murphy have argued that Corporations should be more socially responsible regarding this and refrain from using profit-laundering vehicles created without substantial economic purpose.
The main issue stems from the complex tax structure currently in place. The government has recognised the complexities in tax law and it has also identified that these complexities have increased to a point where the burden for taxpayers in complying with the law has become a real issue. A report from a professional services firm has found that 61% of companies in the UK are unclear about the distinction between legitimate tax planning and tax avoidance. Furthermore, the government’s anti-avoidance legislation is the added fuel this complexity. Moreover, it has been pointed out that the more detailed the rules, the better the opportunity there could be to find and exploit loopholes.
The government currently uses legislative, judicial and administrative
In an academic publication, tax revenues are denoted as “the lifeblood of the social contract, vital to the development and maintenance of physical infrastructure and to the sustenance of the infrastructure of justice that underpins liberty and the market economy” (Hutton, 2002:75). However, it seems that the majority of multinational corporations have been structured in such a way that enables and promotes tax avoidance in its operations. Christensen and Murphy have argued that Corporations should be more socially responsible regarding this and refrain from using profit-laundering vehicles created without substantial economic purpose.
The main issue stems from the complex tax structure currently in place. The government has recognised the complexities in tax law and it has also identified that these complexities have increased to a point where the burden for taxpayers in complying with the law has become a real issue. A report from a professional services firm has found that 61% of companies in the UK are unclear about the distinction between legitimate tax planning and tax avoidance. Furthermore, the government’s anti-avoidance legislation is the added fuel this complexity. Moreover, it has been pointed out that the more detailed the rules, the better the opportunity there could be to find and exploit loopholes.
The government currently uses legislative, judicial and administrative
References: Brittain-Caitlin, W, (2010), Creating an onshore nation is the only way to restore financial sovereignty http://www.guardian.co.uk/commentisfree/2010/dec/28/protests-tax-havens last accessed 22/02/11 Cook Kho-Sy. E. 2009. THE LEGALITY OF THE ASSAULT ON TAX AVOIDANCE PRACTICES IN THE PHILIPPINES Murphy. R. 2011. Tax Research UK http://www.taxresearch.org.uk/Blog/2006/07/18/do-tax-practitioners-need-to-exercise-moral-judgement/ last accessed 10/02/11 Redwood