by Stephen McPhie, CA
Partner, RSD Solutions Inc.
Over the weekend, I heard the UK government minister who is number 2 in the treasury, argue that a certain tax deduction for pension contributions should be limited as this would save the government significant expenditure. This is the first time I have heard a tax increase effectively described, not as a tax increase, but as a reduction in government spending. The logical extension of this is that any tax rate below 100% is government expenditure. In other words, the government is entitled to everything you earn and is incurring an expense in giving some if this back to you. How generous of them!
At the same time, while there used to be a clear distinction between tax avoidance (legal) and tax evasion (illegal), politicians are now describing the former as being part of the latter; at least morally. (Somehow I got the words “politicians” and “morally” in the same sentence!) We keep getting told how many billions in tax large companies and rich people are stealing from us. Of course there is no explanation of the nature of the amount of tax avoided, or whether or not such deductions are desirable. Is it deductions for capital expenditure for example? Or R&D? Or is it all more about votes with little regard for substance or truth?
Is political spin spinning dangerously out of control? More importantly, are you examining your tax risk? Cash strapped governments may be keen to trumpet lower or stable headline rates out one side of their mouths, but what they giveth with the right hand ……
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