Tax avoidance 'robs public services'

The Paymaster General, Dawn Primarolo, has claimed that tax avoidance 'robs our public services of billions of pounds' and another Minister compared the international cooperation needed to tackle it to that used to combat terrorism.

There has been much discussion and comment on UKTECH about the shift in the language used by Government to imply that 'tax avoidance', technically a legal way of arranging your financial affairs, needs to be clamped down on or stamped out.

To date this has focussed mainly on 'tax avoidance' by small businesses, which the Government has sought to address with IR35, Section 660 (the married couple's business tax), the registration of 'tax avoidance' schemes and most recently, the dividend tax, IR591.

Now the net has been thrown wider to catch bigger fish, as the Government announced a joint task force with Australia, Canada and the US 'to increase collaboration and coordinate information about abusive tax transactions following the signing of a Memorandum of Understanding in Williamsburg, Virginia on April 23, 2004.'

The Government's announcement said that 'an initial focus of the work will include the ways in which financial products and derivative arrangements are used in abusive tax schemes by corporations and individuals to reduce their tax liabilities, and the identification of promoters developing and marketing those products and arrangements'.

Robbing the public service

Welcoming this collaborative initiative to counter tax avoidance, the Paymaster General, Dawn Primarolo said: "Tax avoidance works to the detriment of everyone who pays their fair share and robs our public services of billions of pounds. This agreement is further evidence of the seriousness of the problem and of our determination to counter it."

Economic Secretary, John Healey, also continued the line that 'tax avoidance' needs stamping out, and compared the international cooperation needed to tackle it to that which exists for terrorism, organised crime, money laundering and fraud.

He said: "Tax avoidance and the industry that drives it are increasingly an international phenomenon, and it is vital that we have effective international cooperation to tackle it, as we do for tackling terrorism, organised crime, money laundering and fraud. The joint task force is a real practical step forward."

Details

The joint task force will assist the respective tax administrations in addressing challenges arising from abusive tax transactions. The joint task force aims to enable the four countries to:

• Share expertise, best practices and experiences in the field of tax administration to identify and better understand abusive tax transactions and emerging schemes, as well as those who promote them;
  
• Exchange information about specific abusive transactions and their promoters and investors within the framework of the countries' existing bilateral tax treaties;
  
• Carry out their individual enforcement activities against abusive tax transactions more effectively and efficiently.

Officials of the tax administrations will work together in Washington DC during the initial phase of the task force's operations.