New at A critique of the "Tycoon Tax"

For many years, the boundary between acceptable and unacceptable plans to reduce a UK tax bill has been depicted by tax “avoidance” versus tax “evasion”, the former being acceptable and the latter not.

The General Anti-Avoidance Rule (GAAR) report (commissioned by the Government in December 2010 and published in November 2011) has chosen to up-the-ante by using avoidance for unacceptability, and combining it with “abuse” (i.e. “egregious” tax planning) thus dropping off “evasion” altogether.  The document refers more than 40 times to “avoidance”, 18 times to “abuse”, 5 times to “egregious”, and 60 times to “reasonable”.

Apart from some unnecessary changes to current terminology, this may not matter were it not for the clear views of the author, Graham Aaronson QC: “My own approach … is based on the premise that the levying of tax is the principal means by which the state pays for the services and facilities which it provides for its citizens”.

This sentence, together with a belief that tax rates should be progressive according to income or wealth, encapsulates the whole ethos of the report. There is no question or worry as to who decides on what and how large these “services and facilities” are to be.  There is no evidence that Mr. Aaronson understands that all taxes reduce aggregate living standards – irrespective of whether or not collection costs exceed tax revenue – as they often do in respect of higher rate taxes for the “wealthy”.

Read this article.