The news that Jimmy Carr had £3.3m tucked away in a legal but morally questionable Jersey tax structure has gradually gathered momentum this week, building from Tuesday when he was splashed across the front page of The Times and culminating in the PM David Cameron’s damning of him at a press conference in Mexico last night, with much mudslinging in the meantime.
At International Adviser, as with some other financial publications, we are perhaps more acutely aware of the industry built around tax planning and are therefore perhaps likely to be more sympathetic towards Mr Carr’s plight.
However I can’t say that I am particularly sympathetic. I do feel people have a right to make sensible tax planning arrangements, but I also feel that to live in a society and call yourself part of it, let alone make a living satirising it and the people within it, you have to contribute. It is also, to borrow from George Osborne, “morally repugnant” that some of the rich pay significantly less in tax than people in lower paid jobs for whom tax planning is far from their lexicon.
In recent days, despite Mr Cameron’s posturing last night, there has also been much criticism of the UK Government for not doing enough to stop these types of schemes from operating in jurisdictions such as Jersey.
In fact, many media commentators argue that barely anything has been done since Osborne said he regards “tax evasion and indeed aggressive tax avoidance as morally repugnant”, in his Budget speech in March this year.
On closer inspection however, things certainly have been done. Last week saw the publication of the first draft of General Anti-Abuse Rule legislation – a piece of legislation which has been discussed and worried over by the tax planning industry for many years.
Legislative creep
While the publication of the GAAR in itself should not be too worrisome for the large majority of tax planners, there is the possibility of a creep in the remit of this legislation. The first draft, and accompanying consultation document, clearly sets out that this GAAR will initially cover the main forms of tax – income tax, corporation tax, capital gains tax, inheritance tax and stamp duty land tax.
However, the Treasury has already made it clear that it will soon accommodate abuse of national insurance. Again, not a concern for those using reasonable tax planning tools and indeed, contributing towards national health and pensions is a duty of a citizen.
What is perhaps a worry though is the fact that the scope of GAAR is already, by its very nature, wide and that the government is also legislating for its extension in coming years.
The danger here then could be that, when the government – whichever is in power at the time – feels out of pocket, or when a case like Mr Carr’s is brought to public attention – or worse still both (as in now) – the government then cack-handedly widens its net and catches even just the prudent savers, tax planners or even charities within it.
A case like that of Carr’s, which leads to a public outcry and the inevitable political intervention, should make the tax planning industry ask whether it is doing all it can to ensure its reputation is not damaged so that the ordinary people who are simply trying to plan sensibly are not also potentially damaged too.
It is the responsibility of those within the tax planning industry to help root out those without a moral compass and who will in turn destroy the industry from within.
Are you concerned about legislative creep? Do you think cases such as this are damaging for the industry or do you believe the public and politicans can distinguish between tax planning and abuse? Use the comment box below.
