AC3561 Taxation

Introduction  

Tax avoidance according as explained by David Gauke in the 2010 debate on tax avoidance and evasion is a situation in which a person complies with the law but not its spirit. In other words, under tax avoidance, individuals (taxpayers) exploit the existing tax loopholes within the tax system and dodge the payment of the necessary tax incomes.  Gauke on the other hand defines tax evasion as a deliberate act by an individual to oppose or refuse the payment of the required tax. Tax evasion, therefore, involves an individual's blatant objection towards tax payment (Bowler, 2009). In the UK, the government losses over 70 billion pounds to tax evasion, creating an estimated 5.3 billion pounds tax gap. Presently, information about tax evasion argues that over 3,000 legal cases are presented in court about tax evasion in the UK. The tax evasion trend over the past five to six shows an increasing rate in the number of tax evasion cases. Tax avoidance on other hand is projected to be costing the UK government over 1.7 billion, due to incomes from UK's hidden economy, errors, crimes among other factors.  

Evaluation of the notion that “tax planning is drawing a fine line between tax avoidance and tax evasion.”

The concepts of tax evasion and avoidance are as old as tax its self. Over time, the degree to which people are avoiding and evading tax has substantially been increasing (NCA, 2021a).   In the attempt to combat what is scholastically described as a significant increase in tax evasion and avoidance rates, governments such as the UK's government have instituted several control measures. Although these schemes play a vital role in controlling tax evasion and avoidance, the uncertainty of whether they can fully address the challenges remains high (IFA, 2019). The paper, therefore, endeavours to assess the degree to which tax planning creates a clear distinction between tax avoidance and evasion.

According to Bowler (2009), individuals are always looking for a way to reduce the amount of tax that they pay.  Rather than conducting transactions that will generate tax benefits, taxpayers look for ways of transforming the would-be tax returns into incomes. On the contrary, it often becomes challenging and difficult for taxpayers to create a clear distinction between tax avoidance and evasion.  More so, as the HMRC decides to shade more light to distinguish between the two phenomena, it only worsens the situation (Hopkins and Shelton, 2018).  For instance, by introducing new tax rules to address the various sections of the tax planning code, the entire system only becomes more complex and confusing to the ordinary taxpayer.  In the attempt to address every existing form of tax system loophole, HMRC ends up with a fragmented, complex and yet confusing tax planning system.  Conclusively, the notion suggesting that tax planning draws a clear line between tax avoidance and evasion is unrealistic.

The line between tax avoidance and evasion is not generated by tax planning systems within the UK.  Besides the complex and often long tax sections, Acts and or provisions, planning authorities such as the parliament are often not clear about their intentions while drafting certain tax provisions.  In other cases, UK's parliament at times overlooks the possibilities that the language used while drafting these tax plans for the country. In most cases, taxpayers are always on the lookout for any potential areas of weakness that exist within a particular tax plan or arrangement. Secondly, even though the authorities that draft the tax plans may agree, the legal authorities are not always in consent with the drafted tax systems in the UK. Due to these misconceptions between UK's parliament and the legislative bodies, difficulties in interpretation and the distinction between what is legal and illegal becomes blurred and confusing for the judges in the UK.  As Lord Templeman argues that sometimes even acceptable (legal) actions can be deemed as illegal and so do the illegal practices. Therefore, the commonly used wording that evasion is illegal and avoidance is compliance with the letter of the law but not the spirit is subject to the uniqueness of the case facts.  

Furthermore, terminologies that are used in tax planning are more complicated are very broad as if tax planning authorities are attempting to blur the interpretation existing between tax avoidance and evasion (Hopkins and Shelton, 2018). For example, section 1 of the 1988 Income and Corporation Taxes Act, provided that income tax was payable on all profits, property and gains as described in schedules A, D, E, AND F.  However, presently, the same section of the Act has been broadened to include over seven different areas they include items such as "any other amounts provided within the Income Tax Acts are charged to Income Tax.' such inclusions although necessary, tend to complicate the interpretation of taxpayers understanding of what is acceptable and unacceptable (MOJ, 2014). To the authorities, however, any actions that signify the attempt to reduce the tax amount payable are deemed suspicious and therefore illegal. Such a scenario alone in its nature raises several complications about what authorities had intended to communicate. Amidst such unclear situations, the verdict is often left to the mercy of the judges. If they for example decide that the taxpayer's attempts to illegally evade tax were not successful, then the case is no illegality. Alternatively, if the judges rule that tax planning authorities had misconceptions about the taxpayer's acts, still there would be no illegal case of tax avoidance or evasion. Therefore, the language used to communicate the tax planning law in the UK critically conceals the meaning and lacks clear and understandable distinctions between tax avoidance and evasion.  

Evaluating Britain’s anti-money laundering law

 Money laundering in the current global environment has increasingly become a major risk to the global sphere.  Out of the total global GDP, money laundered contributes to over 2.7%, amounting to an estimated 1.6 trillion dollars as of 2009. For such reasons, countries are shifting towards strict regulatory policies and laws aimed at controlling the adverse effects of money laundering.  In the UK, several laws and regulations are being implemented to control and perhaps prevent the practice of money laundering in the country (Bond, Gammie and Whiting, n.d).  Among these laws includes The Proceeds of Crime Act of 2002, the terrorism, Crime and Security Act of 2001, the 200 terrorism act, the criminal justice act of 1993. These laws among others are used by the government in the UK to monitor and regulate monetary transactions. For example, through the Proceeds of Crime Act of 2002, UK's government provides authorities with the right to seize and freeze ant assets that are suspected to be connected to criminal activities (HM Treasury, 2019).  One of the major strengths of the POCA is that it fosters a proactive approach to preventing money laundering crimes (NCA, 2021b).  According to the law, authorities are equipped with the capacity to frustrate any attempts of illegal money and asset transfers. On a sad note, however, the POCA is also limited by a variety of barriers. With the rampant technological growth rates, in the UK and globally, criminals such as terrorists are constantly manipulating the law to their benefit (Edmonds, 2018).  Like most regulatory procedures, the POCA also has its limitations and through these, criminals find a way to exploit the restrictions. For instance, the use of default sentences on confiscated assets or money renders the seizure less effective especially when the criminal decides to pay the required amount due especially among high-end confiscations.  

Considering all the above-mentioned laws, the rapid technological advancements are proving to be challenging. The technological advancements have created several loopholes in the laws within the UK as criminals can easily bypass the installed security checks on money laundering.   With new technologies in the market, UK’s laws are rendered weak. Secondly, in the current global economy, competitiveness is a very vital aspect of service and product delivery (Williams, n.d). The introduction of these strict laws such strict money laundering policies aroused mixed reactions among the population. Financial services and other legal service providers became increasingly concerned about issues such as client confidentiality, costs of compliance among others. These concerns were identified after the UK government undertook its second money laundering inquiry on the POCA law (Reider-Gordo and Butler, 2012). To the public, although the law is essential, it results in a negative impact on their competitiveness in the market as it does not support the confidentiality of their clients.  

Actions to take on identifying a potential money laundering activity

The possible actions that an individual can take after identifying a potential money laundering activity include reporting to the responsible officer of the organization or company.  for business entities that are regulated by UK's money laundering regulations, the persons for issues relating to money laundering should immediately report to the national crime agency (NCA) through sending a suspicious activity report  ( SAR) (HM Treasury, 2015).  

Conclusions and recommendations

However much UK's government defines itself as successful in combating concerns of tax evasion and avoidance, the need for additional effort still exists. According to the lay man's perspective, tax planning success has inevitably been achieved at the expense of a future clogged planning system. Although the possibility of some specific tax sections will be operative for a limited period, however, the cost to business operators still exists. It, therefore, recommendable that the public has exercised their right to pay tax returns and incidences such as undue scopes that excuse certain public individuals from contributing to their obligation. For issues concerning money laundering in the UK, it is recommendable that government and other responsible agencies exercise due diligence while monitoring money-related transfers.  Secondly, it is also recommendable that UK agencies concerned with money laundering implement strict fines, penalties and jail sentences especially for high-end criminals that always fail to meet legal requirements upon asset confiscations.  Like it is a common weakness with all other regulatory policies and laws, delays in making necessary arrests and implementations are critically affecting law enforcement in the UK.  Therefore, there is a need to exercise urgency, efficiency and effectiveness while conducting investigations. For instance, the policy on money laundering in the UK needs to change and embrace tests that are based on "reason to believe" instead of focusing on the "reason to suspect." Under the current procedures, delays in making critical arrests of suspicious individuals involved in money laundering consequently lead to slow response rates. In the suggested approach, such delays will be slightly eliminated and law enforcement will be further facilitated in the UK.

References

Bond, S., Gammie, M., Whiting, J. (n.d). Tax Avoidance. http://zippy.ifs.org.uk/budgets/gb2006/06chap10.pdf

Bowler, T. (2009). Countering Tax Avoidance in the UK: Which Way Forward?  Tax Law Review Committee. The Institute Of Fiscal Studies. TLRC Discussion Paper No.7. https://www.ifs.org.uk/comms/dp7.pdf

Edmonds, T. (2015). Money Laundering Law: House of Commons Library.  https://www.riskscreen.com/kyc360/wp-content/uploads/2015/09/House_of_Commons_Library_Briefing_on_Money_Laundering_Law.pdf

Edmonds, T. (2018). Money Laundering Law.  House of Commons Library.  https://researchbriefings.files.parliament.uk/documents/SN02592/SN02592.pdf

HM Treasury (2015). UK National Risk Assessment of Money Laundering and Terrorist Financing.  

HM Treasury (2019). Tackling Tax Avoidance, Evasion, And Other Forms Of Non-Compliance: Presented To Parliament Pursuant To Sections 92 And 93 Of The Finance Act 2019. 

Hopkins, M., Shelton, N. (2018). Identifying Money Laundering Risk in the United Kingdom: Observations from National Risk Assessments and a Proposed Alternative Methodology: European Journal on Criminal Policy and Research.  25, 63-82 (2019). https://link.springer.com/article/10.1007/s10610-018-9390-5

IFA (2019). Money Laundering Regulations.  https://www.ifa.org.uk/technical-resources/aml/whistleblowing/money-laundering-regulations-2019

MOJ (2014).  Serious Crime Bill: Proceeds of Crime Act Amendments. 

NCA (2021a).  Suspicious Activity Reports. https://nationalcrimeagency.gov.uk/what-we-do/crime-threats/money-laundering-and-illicit-finance/suspicious-activity-reports

NCA (2021b).  Report A Crime. https://www.nationalcrimeagency.gov.uk/contact-us

Reider-Gordon, M., Butler, T., K. (2012). Anti-Money Laundering. https://core.ac.uk/download/pdf/216908707.pdf

Williams, D. (n.d).  The United Kingdom’s Response to International Terrorism. 

Online exams can be a pain in the head. But, you needn’t worry since our online exam help is here at your disposal. No matter how tough the questions are, we have the right team of experts to help you out. The team guides you through all the questions are you struggling to find an answer to. We will provide you with credible study and research material as well, depending on the question. Besides online exam help, we also provide unmatched quality essay writing services and custom writing assistance. You can also hire qualified ghostwriters from our team and get rid of all academic burdens easily.