Tax avoidance debate

Northampton accountants Harris & Co, offer their thoughts on the tax avoidance dispute.

Tax avoidance occurs because of two reasons.

The first is that tax law is poorly drafted and complex. Highly sophisticated multi nationals can easily drive a coach and horses through it. Even at a much lower level, we find the tax law that affects most of our clients (small and medium sized local owner managed businesses) to be very woolly. Typically tax law will give you a rule that inculdes certain terms (for example, wholly and exclusively for the purpose of the trade) and then does not define what those terms mean. It"s no good blaming the likes of Google and Starbucks - the fault lies with MP"s for drafting poorly crafted legislation in the first place!

The second is that tax is too high! If the tax rates were lower, businesses would not try to avoid it! The reason Google goes to Ireland is that the tax rate is not the penal rate in the UK and they happily pay the tax there! This is particulary relevant to small and meduim sized businesses who are trying to grow. Let"s say for example that you run a small company in the UK and work Monday to Friday. You will work all day on Monday just to pay the corporation tax. You want to grow your business and can"t get any funding from the banks. The only way you can fund your growth is by retaining your own profits. If you only had to work until Monday lunchtime to pay your corporation tax, imagine how much more cash you would have available to reinvest and grow your business?