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Business Matters

Morality

There has been much discussion in the press recently about large firms avoiding tax quite legally and the customer fallout with them because the customers decided that it was not morally correct that the large firms should pay so little tax conveniently ignoring the business rates, VAT and PAYE they do pay, the fact that they help employment and keep our shopping centres busy and provide easy access to a legal drug .

But with this new and very subjective moral dimension of tax emerging quickly like this I have been wondering if perhaps the topic needs a bit more of an airing. No one likes benefit cheats or others who don’t pay their taxes but at what point does “deciding that the taxman isn’t interested in my affairs” become tax evasion? At what point does arranging your tax affairs become immoral if the result is that you pay less or no tax?

Here are two simple examples of immoral tax behaviour....

Its less of a problem nowadays since interest rates dropped and payments of interest disappeared from most current accounts but there are still a number of people who receive interest with tax deducted at source. What most don’t realise or don’t want to realise is that even although tax is paid at source you are still liable to pay tax if your total income takes you into the higher rate tax bracket. This is less a problem for those of us who are below that magical income figure of £42k. Many people try to ignore the problem by believing that as tax has already been deducted they don’t need to pay more tax and so don’t report it.

The dividends plus a small salary approach to paying small company directors is entirely legal providing it is operated properly but it means that you pay less tax than you should, giving an income of £42k both before AND after tax. So it is legal: is it moral to pay less tax than you ought to? The tax saved is in the region of £10000.

So is it true to say that everyone who complains about Starbucks wants to pay their moral share of the tax they are due? I suspect it isn’t but morality is not yet part of the taxman’s armoury of weapons. He does though already know that you rent property, have bank interest and what your earnings are: quite enough to be going on with don’t you think?

Now the real test of how moral you are: would you shop your neighbour to the tax office if you suspected they might be receiving untaxed income and not declaring it or .....

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