Sunday, June 24, 2012

An End to Risk-Free Tax Evasion

Just a quick thought on the Jimmy Carr story - one interesting feature is that the Revenue have decided to claw back tax on his K2 and other similar schemes, in such a way that they may end up paying more than they would have done had the scheme never been hatched.

Of course, this suggests one very useful property of anti-evasion strategy: increase the risks. Up to now, the worst thing that could happen to people caught evading is that they have to pay what they were trying to avoid. If the penalties are made more severe, then it becomes more of a gamble: you may pay nothing, but you may pay so much that you would have been better settling for the tax everyone else has to pay. It would then be very reckless for tax advisors to innovate, saving the authorities a lot of resources.

A question of political will, but the public mood is certainly furious on this one.