The terms
“tax evasion” and “tax avoidance” are often used synonymously, but as I found
recently the two terms appear the name but are completely different. It seems
rather bewildering to me that if one evades a tax they are liable to face
criminal charges, but if one avoids a tax then this is perfectly acceptable. To
put this into perspective, consider the government definition of tax evasion:
‘exploiting a tax advantage that parliament never intended.’ Despite this,
offshore tax funds are still considered perfectly legal under UK jurisdiction.
It really is
quite remarkable how much of a grey area this is.
Remember the
Wiki Leaks scandal of 2010?! The Panama Papers make that look like a
Some 11.5
million documents have been released by the whistle-blower “John Doe,”
including 200,000 companies. This has sparked recent discussion: Is the use of
tax avoidance schemes ethical?
Personally,
I think schemes such as those used through the Panamanian law firm Mossack
Fonseca are unethical due to the fact they completely undermine the integrity
of the tax system which we are all a part of. Taxation is vital for society to
function; schools, public services, healthcare ect are all funded through tax,
yet it appears those who are due to contribute the most are tending to
contribute the least, as they are rich enough to employ accountants and lawyers
to mastermind tax-avoidance schemes. As
well as depriving the public of much needed funds, offshore funds can also
harbour corruption for world leaders, due to the banking secrecy laws tax
havens inhibit. Take Russia’s president for example. He has been heavily linked
to hiding nearly $1bn through Mossack Fonesca. To briefly summarise an
extremely complex process, he basically used Mossack Fonesca to set up a number
of offshore companies under name of his best friend, Sergei Roldugin, who was
then able to control the assets by giving out loans through a bank, which,
coincidentally, his friend Yuri Kovalchuk owns!
You couldn’t make it up, could you?! The implications of this compromise
democracy as anonymous transactions can be made to fund corrupt activities like
bribery.
I’ll leave
you with my suggestions on remedies the UK government should take. Firstly, I
believe the government should place more emphasis on making corporate tax less
onerous, as this would make investment in the UK more attractive and minimise
the need for tax havens. Secondly, I think a review of the current tax
legislation is required to prevent massive corporations like Amazon, Starbucks
and Google from avoiding tax through loopholes.
Do you think
my remedies would be appropriate to address the issue?! I look forward to
reading your comments!
BBC,. (2016). Panama Papers: Source breaks silence on
Mossack Fonseca leaks - BBC News. BBC News. Retrieved 8 May 2016,
from http://www.bbc.co.uk/news/world-latin-america-36232142
Harding, L. (2016). What are the Panama Papers? A guide to
history's biggest data leak. the Guardian. Retrieved 8 May 2016,
from
http://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers
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