Hypocrisy of Politicians

Legal Tax Avoidance is just another form of Cost Control

A director’s statutory responsibility is to maximise the income and minimise the costs in the businesses they manage on behalf of the owners of that business – legally of course – but, when you listen to radio or TV journalists or read the papers, once again I see a lack of common sense applied to the way they accuse businesses and their management about being morally questionable.

My accountancy firm make no secret that we believe it is part of our job to work with businesses to help them to increase their profits and preserve  or improve their cash flow, and that means when we come across opportunities  to legally reduce cash outflow on tax, we will introduce these opportunities to clients.

We read in the papers that our clients who organise their affairs in such a way to legally reduce their tax bills are apparently “morally repugnant” as are we their advisers.

And yet the politicians who have organised their affairs to comply with tax rules to reduce their tax bills are not?

It is ironic that one coalition government minister, who has suggested that there is little difference betweenTax Evasion (that is illegal) and Tax Avoidance (that is legal), had organised his/her affairs in such a way to considerably reduce the capital gains tax he/she paid on the sale of his/her second home.

That same cabinet minister is heavily involved in wasting so much of our tax revenue on paying benefits to shirkers, scroungers, and illegal immigrants.

That same cabinet minister is heavily involved in decisions to use our tax revenue to finance military expeditions around the world when bigger countries than ours keep their money to themselves.

That same cabinet minister is heavily involved in decisions to use our tax revenues to pay for outdated working practices in the public services where people who do not use their full sickness entitlement (as extra holidays) are seen as “scabs” and disloyal to their workmates who benefit at our expense.

That same cabinet minister is heavily involved in the rhetoric of need for reform and yet does little about it.

Our clients who organise their affairs to avoid paying unnecessary tax don’t go out and buy fancy cars or yachts, but use the money to preserve cash in their businesses because the banks aren’t lending, to allow them to preserve and create jobs, to allow them to improve their services and product ranges, to allow them to invest in new IT infrastructure to make them more able to cope with the trading downturn more effectively and efficiently.

And now the interesting part – where do the government raise most of their tax revenue?

From VAT and Income Tax!

And so every job preserved and created generates more PAYE and NIC for the government, and gives the employee an ability to spend more than if he/she were on benefits, and therefore generates more VAT for the government pot.

So who is morally repugnant? My client who  organises their business in such a way to minimise paying unnecessary tax, or the government minister who  in my opinion sniffs of massive hypocrisy?

On the back of our business card is printed the famous quote from Lord Clyde in 1929 – “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his store”

So we make no apology for looking to help our clients to have more tax effective businesses. We believe that if there are any laws that the government feels are not working the way they intended – then change them – don’t whinge about morals, especially when most politicians have little balance left in their moral bank account.

We have recently seen the nonsense directed at Starbucks by the papers and by politicians – and yet Starbucks had done nothing wrong.

The international tax laws are so unclear and uncoordinated, that no decision has ever been made where international companies should pay their tax – what politicians need to do is get their act together and create laws for companies to abide by. Why on earth should an international company pay more tax in UK if it is cheaper for them to pay tax for example in Switzerland?

If their directors did not maximise their return for their shareholders, they would be in direct dereliction of their statutory duties, and yet they get chastised by ill informed politicians and public for being professional business managers – so much so that they made a voluntary gesture to pay £20 million  to our exchequer – misguided in my opinion.

Even politicians like Comrade Cable recognise that Starbucks have been unfairly pilloried, when nobody has actually asked how much VAT , PAYE , NIC,  SDLT, and Business Rates etc etc have been generated by them, which is so much more important to our economy than a relatively small amount of corporation tax, in comparison.

It is interesting to read in a recent report by top accountants PWC that the level of tax borne by the top 100 Corporates in UK has increased by 19% since 2005, and these companies effectively contribute the equivalent of 14% of all government tax receipts.

If only the politicians would concentrate their focus on how to avoid wasting that money, rather than criticising businesses on moral issues, suggesting they should be paying even more.

So excuse my frustration – my accountancy firm will continue to help our entrepreneurial clients to improve their profitability, and minimise costs (including tax) , so that they can continue to preserve and create employment, and help turn the country round to recovery while the politicians sit, procrastinate and pontificate.

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