In Which The Prime Minister Avoids Avoidance

David Cameron dug himself into another hole today, by discussing his dislike of "aggressive tax avoidance" (which of course is perfectly legal).

Tax Journal reports that John Humphys noted on this morning’s Today programme that the Chancellor said in the Budget that he regarded tax evasion and ‘aggressive tax avoidance’ as ‘morally repugnant’.

He was trying to clarify, he said, what the government meant by ‘aggressive tax avoidance’ and offered Cameron a case study:

 "A very successful businessman (you’ll know who I’m talking about) creates a structure that transfers most of the ownership of [his] company to his wife through offshore companies based in the Channel Islands. She lives in Monaco, he takes a huge dividend – it’s paid to her, it’s estimated that this reduces his tax bill by hundreds of millions of pounds.’

Humphrys asked: ‘Is that “aggressive tax avoidance” and therefore morally repugnant?’

Cameron declined several times to answer the question, saying he was not going to discuss an individual’s tax affairs. Humphrys said Cameron knew that the individual was Sir Philip Green, whom Cameron recruited to advise the government.

Cameron said he did not know Green’s tax affairs and offered his own definition.

‘There are things that people do that reduce their tax liability, for instance they put money into a pension scheme.’

‘Rather than Monaco,’ Humphrys said.

‘Absolutely,’ Cameron said. ‘I think putting money into a pension scheme is a sensible thing to encourage people to do and that doesn’t count as aggressive tax avoidance … I’m very clear about the difference between putting money into pension schemes or Enterprise Investment Schemes to help start-up businesses, and there is that form of tax avoidance where people are almost specifically setting up a company in order to avoid tax rather than actually wanting to invest in start-ups and the rest of it.’

The government had taken a lot of steps to try to reduce ‘this sort of activity’, Cameron added. ‘For instance we have put £900m extra into HMRC to enable them to go after aggressive tax avoidance.’

Aggressive tax avoidance was wrong, he said. ‘It’s right that the government is going after this activity. Everyone should pay their taxes properly.’

Generally speaking, he told Humphrys, it was ‘sensible’ for a Prime Minister not to have dealings with people engaged in aggressive tax avoidance."

So there you have it folks, "aggressive tax avoidance" is whatever the government chooses to define as "aggressive tax avoidance"; the fact that it is perfectly legal seems to escape them.

Georgie Porgie and Cameron need to be reminded of the wise words of Lord Templeman in 1992:

"There is no morality in a tax and no illegality or immorality in a tax avoidance scheme."