Tax is a difficult subject. No-one really likes to pay it, but there is a grudging acknowledgement that the nation needs taxes to maintain public services and all that. Since Jimmy Carr’s immoral behaviour towards tax returns and Chris Moyles’ attempted tax (not sex) based super-injunction, trying not to pay tax is now a ‘bad’ thing to do.
Major corporations that dodge tax have long been the subject of public derision with Starbucks and its attempt to set the record straight over its UK tax bill a topical case in point (Starbucks blog backfires). However, the debate has moved on and what Jimmy Carr and Chris Moyles have done, is to blur the lines between using the rules created by HMRC to manage your tax bill and aggressive tax evasion. Commentators have cried foul – rich people can jump through the loopholes their advisers find for them and the rest of us pay through the nose.
It’s interesting that accountants joke that the difference between tax avoidance and tax evasion is the thickness of a prison wall. However, today, being within the law is not good enough and a prison wall could actually be some protection if you are judged guilty by the highest, and most vicious, seat of law in the land – the mighty Court of Public Opinion. Legitimate tax planning is now being associated with tax evasion – you are a fraud and a cheat if you minimise tax – and yet none of us like to pay it and most of us would willingly pay less.
From a PR perspective, and in particular from a financial services perspective, this is a communications minefield. Blurring legitimacy and morality makes promoting tax planning difficult. Taxpayers don’t want to pay it; advisers can set up strategies to reduce an individual’s tax burden; but promoting these ‘solutions’ is now morally wrong.
So, in this world where paying tax now makes one closer to God, what are the communications rules about what is right and what is wrong? There is, in reality only one rule and that’s about how much money is involved. Individual Savings Accounts (ISAs) are OK because they are for the masses. Even though the sole purpose of an ISA is to avoid paying tax, they are OK because they are affordable. Pensions are OK as well, everyone needs a pension and because of the tax relief, everyone is encouraged to invest in one (income from a pension is taxed so the relief is more of a deferral anyway).
In this respect, it could be that the Government is encouraging people to avoid paying tax.
However, move away from ISAs and pensions and the communications landscape becomes trickier. For example, take Inheritance Tax (IHT).
Avoiding, or mitigating, IHT is quite straightforward, and again, is in some ways encouraged by the Government through tax breaks on Venture Capital Trusts, Enterprise Investment Schemes, Business Property Relief and also the rules surrounding gifts to dependents or placing money into a trust.
Despite this some commentators believe that planning for IHT is simply rich people exploiting loopholes, when, like pensions and ISAs it is encouraged by the Government. Not giving up your estate to the HM Revenue and Customs and leaving it to your family is a failure of citizenship. Being ‘rich’ and using the rules created by Revenue to reduce the amount of tax you pay is bad, but being of moderate means and using the same rules is sensible.
This means that some companies are now nervous about publicly promoting tax planning for fear of being lumped in with Jimmy Carr – even though they are simply sensibly applying the rules about how the State collects tax from its people. Aggressive offshore tax schemes that are without the spirit of the law, but within its letters, are legitimately there to be criticised. The fact that Chris Moyles went to court to try and keep his avoidance is a clear demonstration of this fact – he knew that he was behaving without scruples and did not want the public to know about it.
What’s more difficult is assessing the when and how much falls into rich loopholes and the Court of Public Opinion’s dislike for fat cats taking the Mickey. This is a judgment call and our advice is to err on the side of caution, since, unlike the High Court, the Court of Public Opinion does not give the right to an appeal.