UKUncut: Is the “black economy” worse than tax avoidance?

The UKUncut initiative continued with its protests again last Saturday (15th January 2011) with a sit down demonstration outside Vodafone on Oxford Street. This was followed by gatherings outside of British Home Stores, Boots and Top Shop. The numbers that attended were fairly modest , but nonetheless effective. All of the stores experienced some disruption of trade, with Vodafone, Boots, and BHS closing the shutters for a brief period.

Previous Blog – UKUncut Protest – Careful with that Tax regime

I find the UKUncut movement very admirable and it is very impressive what has been achieved in a short space of time however it does need to be careful about how it proceeds.

The whole issue of tax avoidance is a difficult subject and is more complex than the simplicity of the protest chanting, and I believe it is in danger of becoming a twee student protest if it does not mature soon. Also it has to square up to the complexity of the issue and decide on its stance.
It would be wrong to try and brand all tax avoidance as wrong, and tantamount to fraud along the same lines as the MP’s expenses. At the protest one of the speakers made the point that “just because it’s not wrong does not make it acceptable” – a fair, philosophical point, but not wholly valid in practice.

Firstly, by definition tax avoidance is not illegal, not to be confused with tax evasion which is the fraudulent, and illegal end of the spectrum of not paying tax. There are arguably a significant number of tax evaders who think it is morally correct, and fair game – a multitude of sole traders, and small enterprises who will work for cash, not account for sales, use family members, claim unemployment/disability benefits whilst working – all of which is defrauding the Treasury of legitimate revenue. In 2010 the official HM Revenue and Customs figures puts this at £42bn far exceeding the £200m+ that Sir Philip Green is supposed to have legally avoided.

Whilst I recognise that having a go at big business is more socially acceptable within certain political groupings the reality is that the thousands of individuals and small organisations are more culpable in not paying their dues to the Treasury. It is highly unlikely that this would ever be the subject of a protest.

The notion that tax avoidance is wrong is also a very questionable premise. Practically everyone in the UK who pays tax will, to some degree, take measures to legally avoid tax. Whether that be at the simple end by using ISA’s, claiming a myriad of expenses against taxable income( which everyone who is self-employed will do), transferring assets to family members to avoid income tax, or capital taxes, through to slightly more sophisticated schemes that larger corporations will use – the principle is the same. In a world where survival is about globalisation then where profits are earned, and therefore where tax is due becomes a moot point. In a system that we all benefit from, which involves corporations generating shareholder value, there is no responsible board of directors who will willingly and consciously pay more tax than is necessary. This will supress dividend and share growth – and for anyone who is likely to depend on pensions, insurances etc then you will all wish for this to be maximised. It is disingenuous and somewhat naive if we deplore one half of the equation and enjoy the other half.

I am aware that some will say that it is a matter of degree – but as mentioned earlier the impact of the “black economy” (tax evaders) is far greater than the impact of legal tax avoidance schemes. Additionally, companies that are managing their finances well and grow through sound business acumen, also employ large numbers of people. If Sir Philip Green ( as an example) decided that he could make more money by investing in China and employing 30,000 people in the Far East, rather than the UK, there would be an uproar – but “we can’t have our cake and eat it” always.

I fear that if UKUncut continue on the tack of these few token cases then they will quickly be seen as an irrelevance as it will be seen as a naive partisan protest with little intellectual legitimacy. If they wish to pursue the cause of paying taxes in order to minimise cuts then there is a wider debate which they need to embrace – however I suspect that this may not be as attractive to the political leanings of some of the current supporters….and the enthusiasm may wither on the vine.

More photos of the UKUncut protest in London

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