As John McEnroe famously said at Wimbledon, ‘You cannot be serious?’ How can Osborne pretend he’s serious about saying ‘aggressive tax avoidance’ is ‘morally repugnant’ when a mere 2 weeks after his budget imposing a 15% stamp duty rate on tax avoiders who put expensive property in an offshore company (so that when they sell, they’re selling the company and not the property, and thus pay no stamp duty), tax lawyers in the City put up two fingers to the new rule by devising a multi-year rolling lease the value of which stays just under the £2m threshold and thus avoids tax? They make a mockery of Osborne’s moral protestations, yet he will do nothing to block this new loophole.
The same insouciance towards the rules is displayed by Barclays, another big tax avoider. The executive pay code of the ABI states clearly that executive remunedration committees “should not seek to make changes to any element of executive remuneration to compensate participants for changes to their personal status”. Yet at Barclays AGM on 27 April the bank is proposing to reward the chief executive, Bob Diamond, with a total £17m pay package (£324,000 a week) including a £5.7m ‘tax equalisation’ payout to take account of Diamond’s increased tax bill when he left the US to join Barclays in the UK. Even big name investors regard this as a grotesque abuse. Will Osborne take any action whatsoever to stop it? Don’t hold your breath.
This cancer of tax avoidance/evasion will only be stopped if government demonstrates it is deadly serious about stopping it in its tracks. That involves passing a tightly drawn general anti-tax avoidance law which targets any device that cannot be reasonably claimed to have any substantive positive purpose other than the avoidance of tax. Where HMRC deems that a device falls within this category, and can justify this judgement in court if necessary, then an individual or organisation found guilty of tax avolidance under this rule would not only have to pay the full tax due, but also a levy of (say) 5 times the amount of the tax as a penalty for seeking to evade the law.
Moreover the tax accountants and lawyers who advised them in drawing up the device that was struck down should also incur a large fine for a first offence, but if repeated in further attempts to assist in the evasion of tax payments due, they should be liable for a custodial sentence. The message would then get across that aggressive tax avoidance by artificial means is a very serious offence and will be punished severely. The Exchequer and the people of this country would be major gainers.