Keeping An Eye On the Czar of Russia

There is of course a difference between Tax Avoidance and Tax Evasion.

In simple terms, Avoidance is legal. The often complex and often questionable setting up of schemes to put tax out of the reach of the Exchequer. Tax Evasion…basically not paying your due..is illegal.

In Britain there is a double standard. If a man does not pay his taxes, he is not reviled. If  a woman takes a welfare benefit to which she is not entitled, she is reviled. And much more likely to go to jail.

Getting tough on tax EVASION is good rhetoric. But getting tough on tax EVADERS is not so easy. The Taxman gets a bad wrap. Even Jesus did not like the Tax Collectors.

And to some extent we are all complicit. Did you ask for a receipt the last time the mechanic round the corner changed the oil filter on your car? The man who priced landscaping your garden….did he give you two prices….the one that goes thru the books and the one that doesnt go thru the books? We know how the game works. Everyones a winner.

There are some jobs and businesses which are basically “cash”. The Taxi Driver. When the Taxi Industry is fully metered and all journeys recorded, watch the fares rise. Did you get a receipt the last time you took a chicken curry and boiled rice home?

Easy pickings for Tax Inspectors in Compliance Units? No not really. The motto is “live and let live” and as long as you arent ripping the arse out of it, you will get away with it. Its simple really. If you own a store in a major town and you declare profits that dont seem to compare with similar stores in your town, it sends up a flag.

What else sends up a flag? Well if you seperate from your wife, its bad news for you if your wife has been doing your books for twenty years. Especially if there are two sets of books. If your wife doesnt like the maintenance payments that the Court Order gave her (based on your official tax returns) and sees you and your girlfriend driving a new Mercedes, then its a near certainty you will be reported to the Inland Revenue.

The Revenue have little power. Self Assessment has swung the balance in favour of the Taxpayer. It is easier to under-declare income because the likelihood of getting caught is slim although the penalties are more swingeing.

Enquiries take years. Indeed some of Britains biggest businesses have more staff than the Inland Revenue monitoring them. There are “deals” where very large firms just give the Revenue a lump sum. The Revenue take it because it is cost effective. But despite the rhetoric about Tax Evasion, no Government dare risk a Daily Mail headline. “Government Doubles The Number of Inland Revenue Staff”. As a vote winner, it is toxic.

The money lost thru Avoidance/Evasion is much higher than money lost thru Welfare fraud. Few go to jail. And its hard to believe that the latest HSBC scandal will result in convictions. The British Government bailed out the Bankers, bought the line that recovery could only be assured if Bankers received massive salaries and bonuses. The most skilled Bankers would all leave Britain. So dont expect any legislation or prosecution which would affect the reputation of the City of London.

Perhaps the most bizarre thing is that the brightest and best Inland Revenue Inspectors are head-hunted and go to work at five times the salary for the biggest Accountancy Firms in London. The Revenue trains people as Gamekeepers who then become Poachers.

Consider the two most famous cases of Taxpayers in Court. Notoriously the Horse Racing World was a cash business. Bonus payments were negotiated and paid in cash. Breeders, Trainers, Jockeys, Stable Staff….thats how it was. These are not the 50pence tips that you give your barber or taxi driver or waitress. These are bonuses paid by the mega rich including Gulf State sheiks.

Take ….Lester Piggott, Englands most successful jockey from the late 1950s to the mid 1980s. A man (“The Long Fellow”) whose height (5ft 8 inches) and natural weight were ill-fitted to being a jockey. But he was himself bred from a long line of jockeys….he was often described as a centaur and “half man, half horse”.

Piggott was notoriously careful with a pound note. There are few super rich  in a Jockeys Weighing Room. Indeed most jockeys in the 1960s were jobbing jockeys heavily reliant on the standard booking fee for maybe njust one ride in a six race meeting. If Piggott was in the weighing room, there was a good chance that he would negotiate his own (higher) fee with trainers. And of course the prize money.

And of course he was able to negotiate percentages of sales and breeding fees. To the extent that he had bulging bank accounts in Cayman Islands and Switzerland. Of course Horse Racing is notoriously Conservative….these people tolerated tax dodging as a way of life.

For all his wealth and success, Lester Piggott was an inadequate man. Uneducated. Severely deaf and with a speech impediment that made him reclusive…and vain….and miserable with money.

The Taxman “got” him in the end. Piggott didnt listen to his own accountants and entered into various closures with the Inland Revenue…signing documentation saying there was no more to declare. Stupidly….there is no other word….he signed a cheque for a large tax bill….drawn on an account that he had not declared.

The Inland Revenue bend over backwards to keep people out of jail. But Piggott had overstepped the mark. He was sent to jail for three years.

Of course….mention income tax and Ken Dodd comes to mind. A comedian, now in his eighties, he was at the top of his game thirty years ago. And he ran foul of the Taxman. Having appeared at a charity his personal assistant told the Organiser that Doddy preferred cash payment. Which was unfortunate….because the Organiser was a Taxman.  Enquiries opened. Vast sums of cash were found in Ken Dodds Liverpool home. At his trial …in Liverpool…he wasfound NOT Guilty. The arrest and trial became a staple of Ken Dodd’s act. “My name is Ken Dodd….comedian and accountant”.

The trial of popular Ken Dodd is thought of as a failure on the part of the Inland Revenue. Yet it is generally believed that many of Dodd’s contemporaries in the world of Entertainment had urgent meetings with their accountants and the Taxman to come clean about their tax evasion. It is also assumed that many in England’s Horse Racing community came clean.

Tax Evasion is a “conservative” or even “Conservative” thing. There is a sense of entitlement in witholding legitimate tax. “It is MY money” is something that resonates with the Rich and/or the Greedy. Am I saying that the self-employed are more dishonest than employees? No….I am saying they have more opportunity.

This weeks scandal….that the bank HSBC, bailed out some years ago by the Taxpayer facilitated tax evasion thru the use of Swiss accounts and that a former head of HSBC became a Conservative minister and member of the House of Lords could well be toxic in Election year. If it transpires that HMRC (the new fancy name for Inland Revenue) were less than diligent in persuing a list of account holders, then that would be bad. If the alleged list of 6,000 account holders is leaked and published, the consequences could be far-reaching.

We cannot be too complacent in Ireland. In the Republic tax avoidance/evasion was and maybe still is…a way of life. Indeed at the height of the Celtic Tiger, the Irish Government announced a general tax amnesty, much to the anger of people in the “employed” sector who had little opportunity to fiddle the system.

Thats the problem with Tax Avoidance/Evasion. In times of plenty, the general public is tolerant of the criminality. In times of austerity, people are less tolerant.