Politcally created issue
Not sure about other countries, but the UK has created this problem all by itself by implementing some very dodgy laws. Originally, tax evasion was illegal and tax avoidance was legal. You could do anything you liked to avoid tax using allowances, companies etc.etc. and it was all perfectly legal, even if its sole purpose was to avoid tax.
Now, the coalition has implemented legislation that says anything implemented with the sole intention of avoiding tax (note the word avoid), actually becomes tax evasion (again, note the word evasion). So now, financial constructs have to have a reason other than tax avoidance for their existence. Of course, the presence of products such as pensions and ISAs etc., whose sole purpose is to avoid tax and they approve of, doesn't strike them as a little odd. After all, why would you put money into an ISA rather than a normal savings account if it weren't for the tax free nature? So, this law basically makes it evasion to use any financial instrument not approved of by government, which of course, changes with the wind!!
Not only did they do that, but they also made the law retrospective, a practice that has become more common over the last decade or so, but used to be never done. I believe Tony Blair implemented the first such law. This means that even if the financial construct you used WAS legal at the time, at a later date it can be declared ILLEGAL and you can be fined/prosecuted etc. for using it!!
As a for instance. Jimmy Carr and his investment antics. The mechanism he used at the time it was created was perfectly LEGAL. Immoral maybe, but legal. It is only this law that has made that type of financial arrangement illegal and because the law allows backdating, it became not just ILLEGAL from that moment on, but since it was created!! Now, I'm not defending what Jimmy Carr did and it may well have been immoral, but there is a big difference between immoral and illegal. After all, can anyone honestly say they have never avoided tax (cash in hand etc.etc.). I suspect almost nobody can claim to be totally free of guilt.
So, what's the difference? Maybe it's simply down to the level of avoidance? A few quid, that's fine, but thousands (or maybe tens of thousands) and it becomes wrong? I don't know. But financial instruments that were perfectly legal at the time they were created and for many years since are now being declared illegal and people being chased for tax on them. Whilst one can argue about the morality argument, it does seem perverse to find someone guilty of an offense before it even became an offense!!
Biting the hand that feeds IT
