Amongst the many fallacies and contradictions I noticed in this new economics foundation report, there is one that particularly stands out as having more holes than a Taleban base that’s been hit by a fleet of US Air Force A-10s. They propose a General Tax Avoidance Rule to earn our Treasury another 10 billion per year, allegedly needed to pay for some disastrous Keynesian spending plans.
They say such a rule has worked well in several other jurisdictions, including Hong Kong (s61A of the Inland Revenue Ordinance) and Jersey (mentioned explicitly in their report). Of course, they can’t answer why, if these low-tax jurisdictions have such effective anti-avoidance measures, the nef and their statist comrades insist on calling them ‘tax havens’ and claiming that the opportunities they create for tax avoidance are a threat to the British Exchequer. Surely, if these countries’ anti-avoidance rules are so effective, they can’t offer many tax-avoidance opportunities for British citizens.
Simply put, generalised laws rarely work well, and generalised tax avoidance rules work less well than most. Anyone who spent any time looking at these laws knows full well that the courts in Australia and Canada have seriously weakened, if not downright emasculated them. After all, no law means anything until interpreted by judges, no matter how well-meaning the intentions of those who drafted it. The only way to consistently reduce tax-avoidance is a system of low, flat taxes that is simple to understand and comply with – something the nef obstinately refuses to countenance.
However, the one aspect of this proposal that really gets to me is the fact that I can’t help but think that it is really hypocritical. The nef is a registered charity. Registered charities get significant tax breaks. Although they are set up as non-profits to confer a public benefit, and this clearly has a bearing on why the Charity Commission agrees to register them as charities, this itself is not relevant to the motivations of the nef in pursuing charitable status. The reason they wish to register as charities is to avoid paying tax.
Therefore, if all measures designed chiefly for the purpose of avoiding tax were outlawed, can anyone from the nef explain why they should not be subject to their own law, and forced to pay tax accordingly.