Effective solution to tax evasion aka "avoidance"

[AtW]

Use worst case scenario to calculate amount of tax that should have been paid under the worst possible case (ie 40% or 50% in personal income cases), make the difference between claimed tax paid and max estimated to be deposited for 6-7 years into special escrow account.

If that goes unchallenged in this time frame then you can keep it with whatever interest rates were at the time.

What will that achieve? Lack of short term tax fiddling boost to those who try to claim it.

Example: some creative UK based workers uses offshore scheme and claims double taxation benefits or such like, whatever he thinks is saved will be deposited into escrow account, and in 6-7 years he can get it. Now if that will be challenged then the loss will be painless - the money are in escrow account, so not spent - no hardship but no unearned gains either, sounds fair right?

Thoughts?

[gingerjedi]

Avoidance is prudent, evasion is criminal.

[cailin maith]

Avoidance is prudent, evasion is criminal.

Avoidance is criminal.... should HMRC get their way

[AtW]

Avoidance is prudent, evasion is criminal.

Last 6 years of "avoidance" can be deemed as evasion, but the tax might not be recovered as it was already spend and people who did that might start appeal to human rights or hardship that they would face as they've spend the money, so if money is safely kept in escrow then neither of that would happen, best of all instant benefit of tax cheating would be removed - the risk of not getting any of it over next 6-7 years would put off most schemes and it would also be obvious who is claiming most.

Sounds like a sensible solution, the main losers will be:
1) tax accountants/lawyers
2) tax cheats

Winners:
1) people who pay taxes honestly
2) Govt
3) Justice

Sounds like a win-win really...

[RichardCranium]

Even if one got away with the evasion for ten years. the HMRC would add interest and penalties that would outweigh the benefits. They'd probably also have a go at giving the directors a criminal record.

It would also be unethical and immoral.

Anyway, you are talking about tax evasion, aren't you? Tax avoidance does not require contingency escrow bank accounts - it is legal.

Or are you referring to the 'creative' solutions that fall into the grey area: the high risk strategies that are designed to fit through loopholes in legislation?

[AtW]

Or are you referring to the 'creative' solutions that fall into the grey area: the high risk strategies that are designed to fit through loopholes in legislation?

Indeed.

Any non-obvious stuff should have tax put into escrow for a few years at least until it's legality becomes clear. This removes short term gain and hopping from one loophole to another, as money would be tied up and each of those "schemes" would have risk that whole gains would not be achieved few years down the line.

The first step has already been made - requiring to declare those tax "avoidance" schemes, the Treasure should have right to indicate that scheme might not be outright illegal but it would require saved tax to be put into escrow for a 5-6 years.

This should kill 95% of "schemes".

[Pondlife]

WTF is "avoidance"?

There's avoidance which is a prudent arrangement of ones affairs and there's evaision which is 2-5 years at her majesty's pleasure and probable financial ruin.

The former is perfectly legal and not morally or ethically wrong. As illustrated in the post by spaceman earlier today - if the rules are deemed to be unfair for the mass majority then the government can change them in the future and the people have the right to alter their affairs accordingly as per the new rules.


What's the problem? The rules are in place and if you break them you pay the consequences.

[Pondlife]

The first step has already been made - requiring to declare those tax "avoidance" schemes, the Treasure should have right to indicate that scheme might not be outright illegal but it would require saved tax to be put into escrow for a 5-6 years.

This should kill 95% of "schemes".

No No No!

The government should be clear about the rules. If this new coalition don't like the old rules they can change them for the future. If there is abiguity then that is their fault for not thinking it through and making the intention clear in the first place.

[cailin maith]

WTF is "avoidance"?

There's avoidance which is a prudent arrangement of ones affairs and there's evaision which is 2-5 years at her majesty's pleasure and probable financial ruin.

The former is perfectly legal and not morally or ethically wrong. As illustrated in the post by spaceman earlier today - if the rules are deemed to be unfair for the mass majority then the government can change them in the future and the people have the right to alter their affairs accordingly as per the new rules.


What's the problem? The rules are in place and if you break them you pay the consequences.

[AtW]

Yes Poundlife, we know avoidance is legal and evasion isn't.

The issue here is that some people "avoid" aggressively only to get big tax claim later and then they go into overdrive to claim human rights, that they will go broke etc etc.

The whole system of accountants looking for another loophole after another is perverse - the way to stop this tulip (and it can help reduce general taxation) is to ensure that ANY half-questionable "avoidance" results in saved tax being put into escrow - so that the person/company who claims it do not have instant benefit, they can't spend it and if, few years down the line, it turns out that this was not legal avoidance, then there is money available "on tap" rather than having people who spend that cash already.

Example: you work in some industry and make a lot of dosh that most people in this country can only dream of, instead of paying 40% tax on income you avoid using offshore scheme making massive savings on tax. Then, once it is required to pay back this tax that person claims human rights, being broke etc etc etc.

If those claimed avoidance tax gains are stored in escrow for few years then I guarantee you that most schemes would drop off like flies in winter.

Simple solution but it ain't likely to happen until some forward looking person with ability to make decisive yet correct decisions is in power, I'll be counting on your vote