Tax Avoidance & Tax Evasion Flashcards
Outline tax avoidance
Legitimate / legal minimisation of tax liability
Tactical planning
Legal means to defer/ minimise tax
Offshore SP & tax advisors take advantages of legislation & structure affairs to reduce liability within the law / residence & domicile play role
REDUCE RED TAPE / fair environment for business & individuals
Attitudes towards tax avoidance
U.K & offshore sought to minimise opportunities for avoidance by implementing anti- avoidance legislation
Removed potential use of arrangements purely used to avoid taxation obligations by using tax laws
Significantly changed since financial crisis / not illegal but more socially unacceptable
+large multinational orgs received negative publicity after revealed it structured affairs for this purpose / public pressure & media attention
HMRC published tax avoidance strategy;
- preventing avoidance at outset
- detecting early where it persists
- countering effectively through challenge
Outline DOTAS
Disclosure of tax avoidance schemes
Used by HMRC to identity tax avoidance schemes / enables government to react quickly to close loopholes by changing laws & use resources to conduct investigations
Promotors of schemes must provide details of clients using schemes / anyone using schemes that falls within DOTAS rules must disclose fact to HMRC
Outline the GAAR
General anti avoidance rule
Introduced by finance act 2013
Designed to counter Act tax advantages from tax arrangements
Permits tax adjustments just & reasonable/ make or modify assessments or amend or disallow client claims
Outline tax evasion
Illegal/ criminal activity of evading tax liability due or payable
Hiding / fail to declare to authority relevant income & gains liable for tax
Suppression & falsification of info on tax returns
Outline tax evasion offshore
Offshore SP can find themselves assisting clients to evade tax
+must check adequacy of advice / good practice to get new advice for each business relationship / tax advice can be benefit clients on particular basis (domicile / resident jurisdiction)
+risk of tick based approach / don’t understand advantages of tax offshore
+must view tax advisors as potential risk factors / caution taken
- admin must comply in accordance with advice
- tax avoidance superseded by anti legislation / tax inefficient as changes/ admin must check tax efficiency of structure
-credit cards for offshore T&C business provide clients access to funds without using personal account in own jurisdiction / open to tax abuse
Aim to combat tax evasion
Gov & international community set new standards in international tax transparency
Agreements provide disclosure facilities & recover funds from secrecy jurisdictions
HMRC set offshore evasion strategy (No Safe Havens)
- no jurisdiction taxpayers feel safe to hide income
- offshore evaders realise risks
- evaders voluntary pay tax due
- those don’t come forward detected &; face sanctions
- no place for facilitators
How;
- reduce ops to evade offshore
- increase evaders & facilities caught
- strengthen punishment
Outline Lichtenstein disclosure facility
Agreement signed between uk & Lichtenstein
People unpaid tax linked to investments or assets in Lichtenstein settle tax liability under special agreement / 1/9/09 - 31/3/15 / tax offences guaranteed not be prosecuted / 10% penalty before 1999
Financial intermediaries satisfied uk customers declare investments to HMRC
Expect to recover £3m
Outline Swiss agreements on tax cooperation
HMRC agreement that UK & Switz tackle tax evasion by those abusing Swiss banking secrecy
New info sharing policies allow HMRC find out Swiss accounts held by uk residents
New withholding tax 48% on investments income & 27% on gains - won’t apply if taxpayer discloses to HMRC
*many commented deal would encourage tax evaders to move funds to Lichtenstein
