Taxation is payment for services rendered

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The government’s own estimate for the tax gap in 2012/13 was £34bn. At an est £21m per school, that could pay for 1,619 schools. In the past year or so, the government has cut the money allocated to each new school-build by 1/3 to £14m. There is not enough money to go round.

Listening to the debates around the recent HSBC revelations, I find myself wondering whether HSBC and their clients, financially switched on though they undoubtedly are, actually understand tax. Using tax-free savings accounts for yourself and your children, no problem. Claiming tax relief for business costs and expenses, absolutely fine. Gift aid for charitable donations, great stuff. Exploiting the system with the sole aim of ‘beating the tax man’, however, as advertised by multiple pages in the Telegraph and Times (just try searching on Google), is fundamentally to miss the point.

Taxation is payment for services rendered by the state.

Stanley Fink (he of the HSBC ‘vanilla’ debate) is a director of the events company Key-2 Luxury Ltd. On their website, Key-2’s stated business is to promote ‘partner brands’ to ‘high-net-worth clients’: “Key-2 Luxury partners include acclaimed hotels, restaurants, bars, clubs and the purveyors of the finest goods, services, entertainment and travel“. I respectfully suggest that the staff and patrons of the partner hotels, bars and clubs that Key-2 charge richly, I am sure, for their services, arrive on roads built by the state. Many staff and customers will have been educated in state schools and probably also stay healthy with the aid of a fine state-funded health service. Fink is another son of a grocer, for goodness sake. Does he not understand the importance of settling bills, vanilla or otherwise?

If you happen to be h-n-w, by the way, well done you. Us Lib Dems are the party of aspiration and opportunity for all and I will always stick up for people being able to enjoy the fruits of their labour and personal inspiration. If the UK were not blessed with a healthy, educated, curious, employable, mobile population, to provide customers and staff to Google, Key-2 Luxury, Amazon, Starbucks, Tate and Lyle and the rest, these businesses would collapse on the spot.

Eric Schmidt said he has ‘a fiduciary responsibility to our shareholders’ that prevents Google from paying more tax than the barest legal minimum. He is wrong. Shareholders and directors have a fiduciary responsibility to ensure any company pays its share of services which are rendered by the state. As do they themselves. And the clients of HSBC. And the rest of us. 

Tax is a good, fine and reasonable business expense.

According to Tax Research UK, the UK tax gap for 2013/14 stands at £119billion. That’s an awful lot of schools and hospitals.


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