Tax: an afterthought or a motive?

Key points

• Many consider tax as an additional cost.
• Taxpayers’ choices can be affected by how effective and fair they consider the tax system.
• Changing people’s perception of the tax system could be a more effective way of reducing tax fraud and tax avoidance than implementing new penalties powers and anti-avoidance legislation.

Most people will know that where there is tax there is tax avoidance. I believe the extent to which a person will go to mitigate the liability depends on a number of factors including:

• whether this is a one-off transaction or an ongoing arrangement;
• the value of the transaction(s);
• the individual’s risk appetite;
• the quantum of tax arising as a result of the transaction(s);
• the complexity of arrangements required to mitigate the tax; and
• the net amount retained after adviser’s fees etc. In general most people don’t want to save money on a transaction to...