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Is an ISA immoral investing if going offshore is for Apple and Amazon etc ?
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busy bee
Posted: 10 November 2012 11:29:21(UTC)
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Simple really - is an ISA (or indeed gifting or using AIM shares to avoid IHT) any more or less immoral that these large companies trading in the UK yet going offshore or elsewhere for their HQ thus avoiding millions in UK Tax ?

I thought it was ones duty to arrange ones affairs as tax efficiently as possible.

Thoughts please !
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jeffian
Posted: 10 November 2012 14:04:12(UTC)
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No. It is not immoral to do anything legal to organise your affairs to pay the least tax. Where the distinction becomes blurred is in cases where completely artificial structures are created solely for the purpose of avoiding tax. When it comes to companies, they can base themselves where they like, but the authorities in each country should look at where the profits are generated and tax them accordingly. I have recently done some transactions on ebay for goods sold in the UK to UK residents but I notice that the fees were charged by, and sent to, E-bay Europe based in Luxembourg. Now why should that be? The answer is for legislators to tighten up the rules. Morality doesn't come into it otherwise tax simply becomes an issue of how much you want to give!
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David Chapman on 12/11/2012(UTC)
Clive B
Posted: 10 November 2012 18:26:50(UTC)
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I found this story rather amusing about a company founded by Margaret Hodge's (MP) father and run by her brother according to The Telegraph

http://www.telegraph.co....enerated-in-the-UK.html

"The Labour MP has been one of the fiercest critics of tax avoidance by companies such as Starbucks, Google and Amazon. However, she is likely to face questions over the limited tax paid by Stemcor, the steel trading company in which she owns shares and which was founded by her father and is run by her brother.

Analysis of Stemcor’s latest accounts show that the business paid tax of just £163,000 on revenues of more than £2.1bn in 2011. However. it is not known whether the company – which made profits of £65m – used similar controversial tax avoidance measures criticised in the past by Mrs Hodge.

Stemcor’s tax bill to the exchequer equates to just 0.01pc of the revenues it booked through its UK-based business. In accounts filed with Companies House, Stemcor revealed that despite generating about one third of its revenues in Britain, its UK tax contribution made up only 2.7pc of the tax the company paid globally"

Seems she should put her own "house" in order before criticising others.

To answer busy bee's question - imo, tax is a question only of legality, not morality.
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David Chapman on 12/11/2012(UTC), Spartacus on 25/11/2012(UTC)
Peter J.
Posted: 12 November 2012 12:12:57(UTC)
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An individual that invests into an ISA or an IHT solution is doing so with net income. In other words, this money will have been taxed already.

Not quite the same as the issues with Starbucks . ISAs are to encourage people to invest in shares and save for their future.

P
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Nokomis HaddockS on 12/11/2012(UTC)
snoekie
Posted: 12 November 2012 12:35:40(UTC)
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It is immoral for the authorities to tax as they do. We worked for it and I suppose the way to describe HMRC is that it is a leech, a parasite.

They collect huge amounts and extraordinary sums are wasted, on Foreign aid, a lot of which is siphoned off to dictators' and others' accounts, payments to 'rich' countries, fraudulent expense claims of MPs/peers, many of whom belong to the taxing parties, labour and Glibdems and supporting illegal immigrants, never mind their medical care and accommodation costs.

If you do not claim legitimate allowances, the Revenue will not tell you you can, , nor will they tell you tat they themselves are not infrequently guilty of allowing to their staff expense allowances they deny others.

And then there are the obscene payoffs/bonuses for failed 'public' servants/quangos execs.
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Middle East Mike
Posted: 12 November 2012 14:09:26(UTC)
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I don't understand this drivel about morals that is banded about of late. Is it moral for our tax receipts to be squandered by politicians in the way they are. Is it moral that the welfare bill is at the level that it is. Is it moral that Europeans can come here, work and claim child allowance, free medical, etc. Is it moral that the fuel price contains 65% tax and all the other players in the supply chain get the other 35% between them. By all means ask about morals but ask the right questions.
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Clive B on 12/11/2012(UTC)
Clive B
Posted: 12 November 2012 14:57:10(UTC)
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Peter J

"An individual that invests into an ISA or an IHT solution is doing so with net income. In other words, this money will have been taxed already"

Imo that's irrelevant
-I believe no tax is paid on pension contributions
-same is true of Gift Aid contributions
hence they have not been "taxed already"

To me, question is simply - has the individual/company obeyed the law ? If they have, that's the end of it.
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snoekie on 12/11/2012(UTC)
Jon
Posted: 12 November 2012 19:09:52(UTC)
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Not clear why the media, and Clive, refer to revenues at all. Taxes are paid on profits so revenues are completely irrelevant.

Certainly the practices of Ebay and those who buy services and products at other than arms length prices should be hit hard, with hefty fines for those caught deliberately fixing the territory in which profits arise.
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vod
Posted: 12 November 2012 21:03:33(UTC)
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Seems to me that what's immoral is the way an isa is portrayed/ marketed to we poor sods,
particularly at the bottom end of the food chain.

Reason !?

One of my modest income investments gives just over 6% net. OK. Part in isa units, part was in direct shares/units. Thought I'd see how much better off I'd be by using part of my remaining isa allowance to convert the directs into isa units . So, divided the units into earnings for each type of unit and got the same answer for both!

Took this up with IFA. Took this up with advisor at a bank. Took this up with product organisation customer liason over the phone . Couldn't get an explanation!

So...... Phoned the tax man. Got an answer..... Hilarious.

All gains on investments are taxable.Regardless of them being in isa or direct units. Ho Ho!
So what about that £10,500 annual allowance?says I.

That isn't an allowance, it's more of a limit really, in so far that when the income/gains from your investment exceeds the £10'500 per annum, then ,and only then do you have to start paying tax on anything above the £10,500 at which stage it can be regarded an allowance,as really it is an allowance relating to capital gains.And then it goes on.... .... & on

Of course the foregoing doesn't apply to cash isa s. We do get a full allowance on them!!!

SO! There we are ! Little Fish, and Dumb Investers ,another problem ? answer? to help make the most of your £10 Grand.

Back to the washing up .

'night all !
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Jon
Posted: 12 November 2012 23:06:42(UTC)
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Of course, with inflation and current interest rates cash ISAs lose real money, so they should not be taxed. The real crime is that non-ISA savings are taxed without an exempt base equal to inflation.
Or - to put it more simply - tax should never be charged until one's investment return exceeds inflation, otherwise it is a tax on capital.
So ISAs are not really comparable to tax avoidance by siphoning off profits to a lower tax regime.
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jeffian
Posted: 13 November 2012 00:19:06(UTC)
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vod,

I didn't really understand your point but this is not right -

"All gains on investments are taxable.Regardless of them being in isa or direct units. Ho Ho!"

An ISA is a tax-free 'wrapper'. Once investments are in there, you don't have to tell the taxman about them, you don't have to pay any Capital Gains Tax on gains, you don't have to pay any additional tax on income and you don't have to declare, or pay additional tax, on any income you draw out of them. The only thing you may be referring to is that any income taxed at source (e.g. dividends which come with a 10% tax credit) cannot be reclaimed so, to that extent, ISA's are not entirely 'tax-free', but in all other respects it must be better to hold investments within an ISA than outside them. As you rightly say, everyone has an annual CGT allowance of £10,600 so you may not feel the need to shelter your investments if you do not come anywhere near this figure, but if you contribute sums over many years, you will accumulate a surprisingly large sum and the day will come when you will be thankful it is within an ISA wrapper. Remember, it is easy to pull the money out at any time but, when you get to the point you wish you'd sheltered your capital, you can't put it in!
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vod on 13/11/2012(UTC)
vod
Posted: 13 November 2012 07:52:08(UTC)
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@ Jeffian,

Hi,

You're right in what you say, and my investments referred to, fall into the taxed at source bit. I agree that one should make use of the wrappers for the reasons you state, and I do, too.

However , the great majority of we working ? retired workers at little fish level feel that they are being given something by putting what they /I have under, an isa wrapper. It then becomes hilarious/histerical ? to find at what level of return one gets the advantage.

At our level (and general lack of knowledge) it would be helpfull if IFA s etc .,would at least point this out to us, just for the sake of clarity. Many of us would be absolutely over the moon to obtain returns approaching £10k a year.

And in that respect the issue of morality might ,perhaps, have been considered way before these very able people, companies or whatever,were considered to be in need of such tax breaks at all.

Please read this softly.
Many thanks.
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Clive B
Posted: 13 November 2012 09:44:13(UTC)
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@ Jon

"Not clear why the media, and Clive, refer to revenues at all"

If you're referring to this text in my previous entry - "Analysis of Stemcor’s latest accounts show that the business paid tax of just £163,000 on revenues of more than £2.1bn in 2011" - that's from the Telegraph, it's NOT my words (I know tax isn't paid on revenues)

Clive
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