THE TIME HAS COME to challenge the distinction between legal tax avoidance and illegal tax evasion, according to the prime minister.
In his first speech on his tour of India as he seeks to build trade links, David Cameron said businesses have no excuse in avoiding paying their fair share of tax when his government cut corporation tax to 21% in order to make it more competitive, the Guardian reports.
He added there should be a moral obligation placed upon tax avoiders to pay up given difficulties in changing the law quickly enough to keep apace with schemes.
He said: “There has been a problem in this debate in the past in that people have said: ‘Well of course there is a difference between tax evasion, which is illegal and should be pursued by the full force of the law, and then there is tax avoidance which is perfectly legal and okay.’
Great emphasis has until now been put on distinguishing between legal tax avoidance and illegal evasion, and tax practitioners are unlikely to welcome Cameron’s comments.
“Some would say: ‘Well just keep changing the law to make the aggressive avoidance illegal'”, the prime minister added. “But with respect to many friends in the accountancy profession it is difficult to do that. So there is a legitimate debate to say very aggressive forms of avoidance are not appropriate, particularly in a country that set a low tax rate it is fair to ask people to pay.
“I think the problem with that is that there are some forms of tax avoidance that have become so aggressive that I think there are moral questions we have to answer about whether we want to encourage or allow that sort of behaviour.”