Jimmy Carr was in the news today for using a K2 tax avoidance scheme. This is basically where an individual resigns from their UK job, then signs with an offshore company who receive the individual's salary from the UK company. The offshore company then pay the individual a small “wage” (which they pay a small amount of tax on) and give them a large (tax-free) “loan”.
Many people in this country earn minimum wage, yet still have to pay 20% income tax on anything they earn over the tax threshold (currently £8105 per year). Low-income families face a multitude of financial struggles, yet tax avoidance in the high income tax threshold (over £150,000 a year) was as high as 30% last year. This means that some people earning hundreds of thousands of pounds a year are paying less tax than the average UK family. How is this legal?!
According to the BBC, tax evasion is the criminal act of avoiding paying the income tax you owe, whereas tax avoidance is the legal practice of paying some dodgy accountant to use offshore accounts to reduce the amount of income tax paid by the UK's richest to as low as 1% (much higher than someone earning minimum wage for a full-time job). What exactly is the difference here?? It sounds like two names for the same thing, but if your account does his job well you can get away with it!
The Prime Minister declared Jimmy Carr's tax avoidance “morally wrong” (yet refused to comment on recent OBE-awarded Gary Barlow's use of another scheme currently under investigation by HMRC). Income tax is used to fund vital services like the NHS, education, the police and social security. Perhaps Jimmy Carr and others do not use any of these services (although I can't imagine he wouldn't call the police if his mansion was being robbed!), however do they expect the rest of the country to shoulder their share of the cost of keeping the UK functioning? It is incredibly unpatriotic and, I would agree, morally wrong.
Mr. Carr has since withdrawn from the tax avoidance scheme, calling it a “terrible error of judgement”. I call it ironic, considering his jokes about other people's abuse of the UK economy!
I just hope that the government's plans to stop tax avoidance in the rich goes further than just cutting their income tax rate to 45% (from 50%). Surely that's just going to earn less money from those responsible enough to pay their dues.
What do you think? I am outraged!