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Higher earners at risk of demonisation in pre-election run-up

Higher earners at risk of demonisation in pre-election run-up

With the UK economy beginning to hit a sweet spot in the final weeks of the election campaign, opposition parties are desperate to bring other issues to centre stage. First it was the turn of the NHS and now it seems that tax avoidance and the apparent onset of unfairness in the tax system have […]

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With the UK economy beginning to hit a sweet spot in the final weeks of the election campaign, opposition parties are desperate to bring other issues to centre stage. First it was the turn of the NHS and now it seems that tax avoidance and the apparent onset of unfairness in the tax system have been thrust into the spotlight. However, in a very timely contribution to the debate, the leading provider of tax services, Baker Tilly, insists that both politicians and the media need to be much more accurate when articulating impressions that the majority of high earners are not paying their fair share, either as the result of distorted tax rates, or rampant tax avoidance.

As every specialist in tax services will tell you, the top 10% of income tax payers already contribute over 55% of total UK income tax receipts, a proportion that might, at first blush, suggest that it is the higher earners who are actually getting the unfair deal. Of course, when it comes to the dirty business of election campaigns, facts are rarely allowed to get in the way of a good argument but those working responsibly in the tax services industry are clearly dismayed that inaccurate statements and false slogans, if repeated often enough, will eventually be accepted as the conventional truth.

What cannot be denied, however, is that, after 5 years of austerity, the public is fast losing patience with those who, irrespective of what tax rates are, simply fail to pay more than token amounts into the public coffers. Experts in tax services concede that the Coalition has made significant progress in closing down many of the more obvious loopholes and artificial tax avoidance schemes but this work is quickly obscured by headlines about corporate giants and highly mobile tycoons who still manage to conduct extremely profitable business in the UK but somehow always manage to transfer this profitability to a nil or low tax regime overseas.

Professionals working in tax services point out that this is a global problem which is now being addressed and the UK government is at the forefront of this urgent work. However, in the meantime, HMRC still has to deal with old-fashioned tax evasion which is not only immoral but, unlike legitimate tax avoidance, is definitely illegal.

Experienced specialists in tax services are of the opinion that both individual and corporate perpetrators of this crime slip onto this illegal road for a variety of reasons of which 3 stand out: pure greed is an obvious compelling factor but so is the perception that tax evasion is an invisible crime that most people don’t even know has been committed. Finally, tax services experts have identified the phenomenon as being thought of as a victimless crime, rather like insurance fraud. The fact of the matter is, of course, that one man’s evaded tax is another man’s tax increase and that the actual victims are those who pay mainstream taxes in the normal way.

As the election approaches, responsible members of the tax services industry are clearly concerned that any new proposals for taxation in the UK are fair to everyone including high earners. They feel that the worst excesses of electioneering are threatening to demonise all high earners purely on the basis that they account for fewer votes than lower income earners. Tax services professionals worry that such a relentless propaganda campaign could well be laying the ground for even higher tax rates on high earners and insist that the politicians concerned should come clean about their plans for future tax rate increases.

If you have doubts about your present and possible future tax position and would welcome objective, impartial advice, please feel free to contact Baker Tilly’s specialist tax services department.