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How the Rich Avoid Taxes and Get Away with It
According to HM Revenue Customs (HMRC), “Tax avoidance is bending the rules of the tax system to gain a tax advantage that parliament never intended”. Most people who avoid paying taxes make the conscious decision to do so and employ any strategy available to them.
Considering that average citizens rarely have the resources to develop tax avoidance methods, the usual suspect are often rich people who can afford to pay just about anything, including their taxes. So this makes you wonder, why not pay in the first place?
It could be because their tax bill comes in staggering amounts. Since the cost is calculated based on their net assets, everything is fair and square, is it not? Unfortunately, the rich has the means to intentionally commit tax evasion. If you have read recent news, celebrities and athletes invested their money on companies that turned out to be a tax evasive move. Other personalities open Swiss bank accounts to hide part of their assets, so it will not be included in the tax calculation.
And we are not talking millions here, but billions. In an offshore account, 5% of the funds can be withdrawn without tax liability. What’s 5% of £5 billion? Yes, still a lot of money. Then, there is Starbucks that used foreign entities to make it appear that no profit is being made in the UK, thus avoiding tax payments.
What is even worse is the fact that accountants of the rich and famous could be the same professionals who are part of the team that drafted tax laws. This means they have intimate knowledge of the rules and regulations, giving them intelligence on the loopholes and methods to get around the tax laws. If this is the case, the parliament is undoubtedly powerless in cracking down such a blatant attempt to avoid tax.
What happens when the rich are confronted by their thieving ways?
They often use the excuse that everyone is avoiding taxes by simply having an ISA or buying from duty free. These, along with starting a company, employing a partner, not taking an income, making an investment and giving to charity, do not conform with how tax evasion is described by HRMC, as they are activities that parliament intended. This means they are considered legitimate. Tax relief is benefitted from such moves, rather than tax evasion.
Besides, the amounts of taxes deducted from these activities are minimal compared to the unpaid taxes by the rich. There is just no comparison. ISA, for example, is a scheme made by the government to encourage people to save for their future. This makes it intentionally designed by the parliament and should be in no way likened to tax avoidance.
What may be considered a means to avoid taxes is when someone leaves the UK for at least five years, so they do not have to pay Capital Gains Tax on UK-held assets.
Based on the information above, it is obvious that British society finds tax evasion by the rich to be acceptable. But is it favourable to the state? Absolutely not. To start off, the rich already lives the good life, free of any worries, especially related to debts, and still they ask for more from the state, even if they already enjoy several benefits, including a financial system bailed out by the state andtax creditsto subsidise the salary of their low-income workers.