Brown Should Stop Fixating On Tax Avoidance, Says PKF

by Amanda Banks, Tax-News.com, London

17 March 2006

UK accountant and business advisory firm PKF LLP has warned that the Government’s fixation with anti-avoidance legislation is both counterproductive and, ultimately, damaging to the UK economy.

The Chancellor, Gordon Brown, should stop interfering with the taxpayer’s right to manage their affairs in a tax-efficient way and focus on fraudsters instead, says PKF.

HM Revenue & Customs estimates that the UK tax avoidance industry costs the exchequer approximately GBP10 billion a year, equivalent to GBP350 a head for the 29 million taxpayers in the UK. But PKF points out that as this is only a small percentage of the estimated total tax losses from avoidance and evasion of GBP75-100 billion, it would appear that the Government could reap richer rewards if they concentrated on law breakers rather than those who try to plan their affairs within the law.

Peter Penneycard, national director of tax at PKF, says, “The noble art of tax planning has been transformed by this Government into something that ‘dares not mention its name’. Each Budget introduces yet more aggressive anti-avoidance measures aimed at preventing law-abiding taxpayers from managing their businesses in a tax-efficient way. Last week’s announcement about yet more measures targeting film investment partnerships is likely to be the tip of the iceberg of new rules for this year.

“These measures often only add complexity and costs to businesses and HMRC’s increasingly invasive attitude is creating a climate of fear amongst honest businesses. In the short term, this may be a cheap way to collect more tax but it fails to tackle the much bigger issue of tax evasion. If you are rich enough, the simplest solution is to become a non-domicile and set up shop in Monaco where Prince Albert rather than Gordon Brown can benefit from your wealth. At the other end of the scale, you could just hide it under the bed. Businesses are shying away from doing anything that tangles them up in the red tape associated with employing staff or taking up new investment incentives – which is clearly not good news for the long-term future of the economy.”

“The corporate tax take is now at the highest level it has ever been, so, there is really no need for the Government to keep turning the screws on businesses that seek to be tax-efficient within the law. Treating taxpayers like potential felons benefits neither the economy nor the exchequer.”

PKF specialises in advising the management of developing private and public businesses. The firm has more than 1,500 partners and staff operating in 23 offices around the UK. PKF (UK) LLP is a member of PKF International, which has more 12,800 people operating in over 100 countries around the world.

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