Giving some leniency, it is clear that “balancing the books” of our nation is a very difficult task. Not dissimilar to our own personal households, there is always another item that can be purchased that we feel could enhance our position, and often, we justify borrowing to make that purchase.
Issues can arise though where we over-extend ourselves and costs exceed income. The obvious solutions are then, reduce costs, increase income, or a bit of both. When this is applied to a nation’s finances though, political dynamics are introduced, approximately splitting one’s allegiances to Conservatives or Labour respectively (although it is far from this simple).
Historically, it was fairly universally accepted that tax evasion was illegal and tax avoidance was not; instead being a “bending” of the rules rather than a breaking. However, neither are defined in statute so we must accept at this early stage that we are entirely talking about semantics.
And this is where the aforementioned political dynamics are relevant. Recently there has been considerable press coverage and missives from HMRC denouncing tax avoidance as unsavoury, unacceptable and, regularly enough, applying the same definitions interchangeably. The purpose behind this being clear enough, to influence taxpayer behaviour away from methods that reduce their tax burden (and note that these include a significant number of long-standing traditional methods, we’re not necessarily talking anything outrageous here). Thus the plan is an increased tax yield – balancing the books.
Replacement terms such as ‘tax planning’ and ‘tax mitigation’ are therefore now quite prevalent in common parlance, essentially filling the void where tax avoidance has been “stolen” by HMRC to lump together with tax avoidance.
So, when one considers the term ‘tax avoidance’ it is purely a matter of linguistics. I have heard it described that tax planning is what “I” do, tax avoidance is what other people do.
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