Chris Blackhurst: ‘Aggressive’ tax avoidance? It’s time for politicians to stop offering soundbites and send out hefty bills

According to David Cameron, “aggressive” tax avoidance is “morally wrong”. His Chancellor agrees. George Osborne describes “aggressive” tax avoidance as “morally repugnant”.

They were speaking in 2012 after Jimmy Carr, the comedian, was exposed for having channelled £3.3m a year into a tax avoidance scheme. This week, the Government was repeating the same mantra, this time in relation to the financial affairs of another entertainer, Gary Barlow, the singer.

All of which is good, soundbite stuff, designed to make ministers appear as though they’re winning the battle against tax avoiders. Except that the figures tell a different story. According to the Treasury, more than £4bn a year is lost through artificial tax avoidance schemes. Other estimates put the total loss much higher, at £30bn.

It’s a slippery slope, declaring war on tax avoiders. When Gordon Brown was in opposition as shadow Chancellor he liked to promise that if Labour ascended to power it would launch a massive crackdown on those who went out of their way to minimise their tax bills. Labour duly entered government and what happened? Precisely very little.

The theory shouted from the conference platform is difficult to translate into reality. I can picture the scene, of the smooth, Whitehall mandarin, agreeing that more should be done, but then questioning, “Yes, minister but how do you propose to do that, exactly?”

I’d go further and say the phrase “aggressive” tax avoidance has all the hallmarks of a sketch from the Yes Minister show. Aggressive is a classic, weasel word, designed to offer a get-out rather than an easily prescribed target. It’s genius, a description entirely open-ended and, therefore, in this context, quite meaningless. It sounds good, though. It also implies “non-aggressive” tax avoidance is morally okay.

The clue that this was some ruse dreamt up in the recesses of the mind of an official or spin doctor is that nobody actually knows what it means. Or rather, they think they know what it means but they can’t find the words to define it – not in such a way that a smart lawyer would be unable to demolish.

To help taxpayers, HMRC publishes some non-exhaustive pointers for guidance:

* It seems too good to be true and cannot have been intended when Parliament made the relevant tax law.

* The tax benefits or returns are out of proportion to any real economic activity, expense or investment risk.

* The scheme involves arrangements which seem very complex, given what you want to do.

* The scheme involves artificial or contrived arrangements.

* The scheme involves money going around in a circle, back to where it started.

* The scheme promoter either provides funding to make the scheme work or arranges for it to be made available by another party.

* Offshore companies or trusts are involved for no sound commercial reason.

* A tax haven or banking secrecy country is involved.

* The scheme contains exit arrangements designed to side-step tax consequences.

* There are secrecy or confidentiality agreements.

* Upfront fees are payable or the arrangement is on a “no-win, no-fee” basis.

* The scheme has been allocated a scheme reference number by HMRC under the Disclosure of Tax Avoidance Schemes regime.

So, here’s my exam question. Based on the above, do any of the following count as “aggressive” tax avoidance:

* A 15 per cent holding in a British-based, luxury wallpaper business held in an offshore trust (the holding is believed to belong to George Osborne’s family and the business is Osborne & Little).

* A home on the Scottish island of Jura, a favourite spot with holidaymakers, is registered to a company in the Bahamas (it’s Viscount Astor’s house and he is David Cameron’s father-in-law).

* Someone is British, lives here, works here, owns businesses here, yet they’re able to claim non-domicile status for tax purposes (they’re too many to mention individually).

* A British retailer puts his companies in the name of his wife who lives in Monaco (no marks for this one but he was appointed a Government adviser on reducing public spending).

I will add another one, because I know you like quizzes. Is an American corporation parking $70bn (£42bn) offshore and then using the money to buy a British rival and take advantage of Britain’s lower tax rate engaging in “aggressive” tax avoidance? While this last one does not relate to keeping cash out of the clutches of HMRC, it does highlight a particular mindset, albeit an American one and the company behind this way of thinking, Pfizer, was lauded by the Prime Minister (“a cheerleader” for Pfizer is how Labour described him) for its move on AstraZeneca.

Since when has tax avoidance been split into “aggressive” and “non-aggressive”? What is “non-aggressive” tax avoidance when it’s at home? Like many non-members of the super-rich I have no choice where payment of tax is concerned. It’s taken off at source, direct from my income, as Schedule E. If I do anything to try to reduce that charge is that “aggressive” or “non-aggressive”? Answers please.

The fact is I can see no difference between the two – tax avoidance is tax avoidance, aggressive or not – but for the purposes of politicians wanting to appear as though they mean action, saying they’re pursuing one and not the other, it makes them seem decisive and in control.

Here’s another nugget, gleaned from Companies House. A trawl of all companies registered there reveals the following totals, of British company directors who reside in offshore tax havens:

* Switzerland 9,317

* Luxembourg 1,026

* British Virgin Islands 1,025

* Monaco 732

* Bermuda 436

* Bahamas 328

* Cayman Islands 224

8 Liechtenstein 185

* Barbados 141

* Netherlands Antilles 13

* Channel Islands 2,184

Add that lot up and you find there are at least 15,611 British company directors based in overseas tax shelters. If I was HMRC searching for tax avoiders I’d put all 15,611 of them under the microscope until they squeal and offer to make a settlement – at which point the revenue should drive a hard bargain, harder than it’s been doing of late. After all, what can be more “aggressive” in terms of tax avoidance than going and locating yourself in a tax haven?

The Swiss number is interesting. It’s actually risen, from about 7,000 two years ago to more than 9,000. So much for the Government’s declared putsch against tax havens, and those who use them.

What the current crop of ministers have found, as others found before them, is that making ringing statements about purging tax avoiders is far easier in theory than in practice.

Where they’re making a grave mistake is in choosing to narrow the definition of who they’re chasing. That’s a gift to the sort of sharp-minded lawyers and accountants who make a very lucrative living in the tax avoidance area, or as they prefer to call it, “tax minimisation”. We’ve enough loopholes as it is in our tax system, without creating another one.

Far more effective would be to apply the broad brush – to go on the front foot and send out bills requiring people to pay more, based on all their earnings, domestic and overseas – and challenging them to explain why they shouldn’t. Splitting hairs between “aggressive” and “non-aggressive” tax avoidance will get HMRC and the Government nowhere.

What is required is more aggressive pursuit of all tax avoidance, plain and simple.