Real action needed on tax avoiders

The tax affairs of the rich and famous are once again under public scrutiny. This follows the “Paradise Papers” leak of 13.4 million files from “two offshore service providers” and the company registries of 19 tax havens.

The files reveal much about the financial affairs of some of the world’s richest individuals and biggest multinational companies, and details the myriad ways in which they avoid paying tax.

We hear a lot about the difference between tax evasion and tax avoidance.

Tax evasion is clearly illegal, when a person or a business deliberately misrepresents the true state of their affairs for tax purposes.

Tax avoidance however is not illegal, but allows individuals or corporations to “exploit” the tax system to reduce their liabilities. This often includes “artificial transactions” through offshore companies which, though not technically unlawful, are nonetheless shameful.

Just look at the convoluted actions of the Formula I racing driver, Lewis Hamilton, uncovered via the “Paradise Papers.”

To dodge taxes of more than £3 million on the purchase of a private jet costing £16.5 million, Hamilton’s advisors used “shell companies” in places such as the Isle of Man, British Virgin Islands, and Guernsey.

In a complicated scheme, Hamilton’s advisors achieved the tax dodge by setting up an artificial “leasing business” through which Hamilton rented his jet, for free, from himself. Similar arrangements were concocted to purchase a €1.7m motorhome.

Sadly, such schemes do not represent isolated episodes, but are a popular tactic for the very rich to play the system.

As far as I am concerned, it is a disgrace that such rich individuals have been able to divert millions from the public purse into their own pockets. And instead of the money being used to fund public services such as the National Health Service, it has presumably been used to fund the luxury lifestyles of a small minority.

It is simply wrong that people with access to well-paid accountants and lawyers can be treated differently to the rest of us when it comes to payment of tax.

As a result of such industrial levels of tax avoidance, ordinary people are suffering greatly because of the cuts in public spending

The Office of National Statistics recently reported that the “tax gap” – the difference between the amount of tax that should, in theory, be collected by HMRC and what is actually collected – is estimated to be £34 billion (£34,000,000,000) each year. Others such as the PCS union claim the “tax gap” is even greater.

Surely, it is time that the Government must take decisive action on such tax cheats and eradicate all these ridiculous avoidance schemes.

[This will be my article in this week’s Cornish Guardian].