Is it bad to avoid tax?
Tax avoidance more acceptable than tax evasion
Tax avoidance is a dirty word. Tax evasion is dirtier still. Get caught trying to evade tax and you'll likely go to prison. Get caught trying to avoid tax and you'll be judged as morally questionable.
There have been several recent stories in the news of wealthy business people taking great pains to avoid paying as much tax as possible. The stories are dressed in such a way as to suggest that what the individual is doing is illegal. Let's be clear, using the tax laws to your advantage, however obscure the scheme might be is not illegal. However, there is something about the act of aggressively minimising tax that the general public finds morally repugnant.
The public opposition to tax avoidance
The public aggressive opposition of the wealthy utilising aggressive tax avoidance stems from the assumption that to have become successful the individual needed to take something from society. This could be the use of publically funded infrastructure, use of the general workforce, the tax, legal system and protection of the country, the use of the countries public services such as the NHS and education.
In defence of tax avoidance
A wealthy individual aggressively avoiding tax would argue that they already pay more in taxes than they have ever or would ever take from society. They feel that they have already given the minimum requirement and therefore feel no shame in using the current tax system to their advantage.
Additionally, we are all guilty of using the current tax system for tax avoidance. That probably includes you, dear reader. You are also guilty of tax avoidance. How can that be?
If you have ever put money into a pension scheme then you are legally reducing your income tax bill. The government gives back the tax that would have been charged on money that you put into a retirement pot.
You've probably also sheltered you money from tax. If you've used an ISA (individual savings account) then you're sheltering your capital from any capital gains tax in the future. Additionally, you're sheltering the income from your savings from income tax.
Upon reading this, individuals may argue that their form of tax avoidance is expected, less aggressive and therefore morally justifiable whereas other forms of tax avoidance are not. However, in terms of the technicalities of tax law they are equivalent. Both instances: ISAs and pensions versus aggressive avoidance schemes utilise the existing tax law to minimise tax.
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