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Jimmy Carr apologises for tax avoidance but what is Cameron doing?
The comedian has said sorry for his 'terrible error of judgement'. Will the PM do the same? And can we have a proper debate about tax?
I’d like to know what is fundamentally different between doing that and using a tax avoidance scheme like Carr and others have done? One is 'disguised remuneration', the other is 'disguised wealth'.
In attacking Carr Cameron may have opened a can of worms he comes to regret. The people who advise wealthy clients to buy into tax avoidance schemes like K2 are the same sort of advisers who might recommend an offshore fund or two.
The K2 arrangement is said to involve drawing up an employment contract between an offshore company and the wealthy individual. The offshore company pays the individual a low salary but tops this up with ‘loans’ which can be written off against tax.
In other words it is the kind of 'employee benefit trust' that the last Labour government and the coalition government have repeatedly said they wish to target. Employee benefit trusts have been widely used in the City in recent years. As a result I can’t wait for the stories to appear about how many people linked to the prime minister and his government have benefited from these schemes.
Chris Evans on BBC Radio 2 this morning cleverly made the comparison between the Carr controversy and Pastie-gate, for this could be another PR disaster for the PR man turned PM. Like pasties, how do you tell when a tax planning arrangement is ‘hot’ or ‘cold’, ‘dodgy’ or ‘morally ok’?
The HMRC last week published plans for a general anti-abuse rule (GAAR) which will make it much easier for it to close down tax avoidance schemes it doesn’t like. Rather than identifying every conceivable loophole, the HMRC will issue a set of principles against which schemes can be judged.
Some people argue it is no coincidence these stories about celebrities' tax affairs are appearing now, as it softens us up into thinking the GAAR is a good idea. In my opinion GAAR is more good than bad. Yes, it gives the tax authorities a lot more power, and that could cause problems, but the main benefit is it will enable HMRC to escape the silly cat-and-mouse game with accountants and tax experts, some of whom spend far too much time devising ways around tax law.
The principle-based approach to tax has got to be the right one. But we need to work out what the principle is and what it means in practice. I’m not convinced we have a government or a prime minister well placed to lead that debate.
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