This got my mind going through the usual questions I pose when such discussions arise.
Around lunchtime I was ploughing through feeds and caught up with Al Jahom going over the same topic and again covering the retweeted tweet from @sarahluv81 who I used to know in Glasgow, pointing out that she conflated tax avoidance with tax evasion.
After some more reading, prompted by twittist @sarahluv81, it seems that the common definition of tax evasion vs avoidance:Ultimately this conflation means that the Gift Aid scheme is evil tax evasion and should be stopped. Gift Aid whereby you can personally allow charities to claim back the income tax on any donation. So if you donate £100, you’ve already paid £22 income tax on that when you earnt it, so the charity can claim that back from the government.
Tax avoidance is the legal utilization of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast, tax evasion is the general term for efforts to not pay taxes by illegal means.
.. has been superceded – or at least refined – in English law.
The United Kingdom and jurisdictions following the UK approach (such as New Zealand) have recently adopted the evasion/avoidance terminology as used in the United States: evasion is a criminal attempt to avoid paying tax owed while avoidance is an attempt to use the law to reduce taxes owed.
There is, however, a further distinction drawn between tax avoidance and tax mitigation. Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament: IRC v Willoughby. Tax mitigation is conduct which reduces tax liabilities without “tax avoidance” (not contrary to the intention of Parliament), for instance, by gifts to charity or investments in certain assets which qualify for tax relief. This is important for tax provisions which apply in cases of “avoidance”: they are held not to apply in cases of mitigation.
Taken to its extreme, if you donate all your earnings to a charity, the charity could claim the complete swathe of income tax and essentially you would have evaded paying any tax on your earnings. EVIL.
Anyhoo, the two questions that I try to ask whenever the subject of income tax arises are these:-
How much tax do you think you should pay?
Be it a proportion of your income or a lump sum, this is about you yourself, earning as much as you do.
@rosiebunny wanted to pay 5% tax
I’d settle for 35%
@AlJahom would accept 40% but would prefer a minarchist 10%-15%, and
@sarahluv81 thinks it depends on how much I earn.
I did some back of the envelope sums, including council tax, national insurance, income tax, fuel duty, booze duty and vat, I pay 50% tax right now. Bah I say, Bah!
Would you accept a pay cut in order to fund a pay rise for those earning less than you?
In answer to the second question, I would accept a pay cut to fund those on the lowest wage at the place I work. However, other people I’ve asked say they would but only if the people earning more than them take pay cuts too. That’s a no then. Its not about other people, it not about everyone else in the company, its about you, and if you’re basing your answer on what everyone else does then it’ll never work.
It’s a big fundamental thing about the redistribution of wealth. Is it about redistributing your wealth or someone else’s?
If you think it’s about someone else’s then its theft and you’re a thief. You can dress it up as society or constitutional or whatever, but it just comes down to theft, taking people’s hard earned wealth without their consent.
So its about consent. Back to the first question. I could probably form a city state with Al Jahom, we broadly agree on levels of taxation, me with between 35% and 42% and him with 40%, but couldn’t form a city state with Rosie, her levels of taxation are too low to be of any use in my opinion. Sure, her state might work, and who knows citizens of my state might all decide to up sticks and move to the Rosie Free-State. Sarahluv on the other hand might find it awkward in both states, since she’s always be comparing how much she earns and pays with everyone else and then demanding special treatment for either herself or people who earn more or less, that’s explicit in her position.
Maybe its similar to Rosie’s position, maybe in the Rosie Free-State only people called Rosie are subject to such low taxes and other groups must pay more, I dunno, its hard to tell.
Anyhoo, considering I’m currently paying around 50% tax, both Al and Rosie’s tax regimes seem better than my current situation,