Wednesday, 18 March 2009

Tax Avoidance

This is a phrase that we are going to hear more of and every time I hear it is going to rankle. It is always used in a pejorative way, insinuating that the person or business is cheating. Yet Lord Tomlin as long ago as 1936 said in the UK House of Lords case IRC V Duke of Westminster (1936) in TC 490, (1936) AC I:

“Every man is entitled if he can put to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioner of Internal Revenue or his fellow tax payers may be of his ingenuity he cannot be compelled to pay an increased tax.”

In other words legal tax avoidance might seem unfair but it is still legal. So you can begin to imagine my surprise when I hear Mr. Cable, the Liberal Democrat Treasury spokesman, spouting forth on the Today programme on Radio 4 this morning where he stated that it was "incongruous" and "offensive" that banks that rely on state support should avoid paying tax. I would suggest that far from being offensive this is in fact the sign of a well run bank. I would go further and propose that Mr. Cable’s comment is the one that is incongruous. Why would I want to see the government plough millions of pounds of tax-payers’ money into a bank only to see a percentage of it come back to the government as part of a tax bill. That would seem to be completely pointless.

Mr Cable's comments can be seen here.

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