Friday, June 22, 2012

Special tax incentives lead to tax 'avoidance'

A recent hot issue in the UK is that of tax avoidance (which I am informed is legal and different from tax evasion which is not) practised by practically anyone with a reasonable income - http://www.thetimes.co.uk/tto/money/tax/article3453189.ece - an article in London Times lists " From dentists to doctors and financiers to footballers, through lawyers, dressmakers and an award-winning baker: investors in tax-efficient schemes read like an A to Z of working Britain."

The reason most of these tax avoidance schemes work is because of complex tax legislation that from time to time favours investments in one activity or another.  Over the years these range from encouraging investments in forests (green!) to films and music (culture and arts?) and so forth.

These schemes seem worthwhile and important at the time, but the legislators obviously know little about the Law Of Unintended Consequences.


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