In its desperation to raise ever more taxes the Government is increasingly making tax avoidance sound like tax evasion.
As Lord Clyde famously said in a tax case: “No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.”
The emphasis by the Government is on clamping down on tax avoidance but no mention is ever made of the amount of tax wasted by taxpayers who do not claim all of the tax reliefs and allowances available.
According to unbiased.co.uk taxpayers will pay an extra £4.6 billion in tax this year by not taking advantage of the tax reliefs and tax shelters available to them.
The actual amount of tax paid by the average person is significantly higher than we realise when taking into account indirect as well as direct taxes. I estimate the average person is paying around 70 per cent of his income in taxes, while the highest paid are paying up to 90 per cent of what they earn in taxes.
Politicians and the media are fond of slating higher earners yet most of these people contribute the most to society as entrepreneurs and business owners. Yet they are penalised very heavily indeed. The top 10 per cnet of earners pay 50 per cent of all income taxes.
On the other hand the people who contribute the least, those on welfare, pay no direct taxes, do not work and live in houses many hard working taxpayers cannot afford. Such people are supported financially by people who do work and pay taxes.
My own father worked all of his life, paid his taxes, never claimed any benefits yet when he went into a care home for the last two years of his life had to pay the care home fees fully. At the same time there are people on state benefits who would get 100 per cent funding by the state were they to go into a home. Hardly fair is it?
I have long held the view that if you are fit enough to work you should have to work for the Government to earn your benefit or get no benefit at all. I am sure many people on benefits could work in a care home for example, reduce the costs for the elderly residents and do something meaningful.
As Ronald Reagan once said “The problem is not that people are taxed too little, the problem is that government spends too much.”
Benefits will continue to be cut. It is inevitable. Out of total Government expenditure of nearly £700bn last year, £180bn is spent on welfare and pensions and £128bn on health.
Working taxpayers are disenfranchised. Something has to give.
Tony Byrne is financial planning director at Wealth And Tax Management