The Exchequer’s coffers are running on vapour and tax avoidance presents a soft target for politicians. On Monday, Nick Clegg claimed that “ethically wrong” legal tax avoidance costs the economy £42 billion a year. As a tax recruiter, I was particularly interested in whether this might have an impact on the taxation professionals that I work with.

Clegg’s Robin Hood approach is an obvious means for the Government to rake in some much needed cash. My colleague William Hepworth discussed the tightening of transfer pricing rules in Taxation 2 magazine this week so raking in some extra cash through taxation is already on the agenda.

As always though it’s not as simple as closing a couple of loopholes and suddenly the deficit is paid off. Quantifying the impact of tax avoidance on the economy is complex stuff. Business leaders argue these funds are reinvested in job creation: taking people out of the benefits system and getting them paying tax. Ultimately, the Exchequer wins anyway.

Furthermore, high net worth individuals are often entrepreneurs, contributing to the economy in areas too numerous to quantify. They’re also geographically mobile; remove the incentive to be here and they’ll be off quicker than you can say private jet.

Clegg’s ethical argument is also complex. Is it wrong for someone like Philip Green to run a business employing thousands of people in the UK with a turnover in the billions whilst himself being resident in the tax haven of Monaco? Is investing in start ups or venture capital unethical? Is investing in an ISA unethical?

Our tax system is a pretty fine balancing act between encouraging investment in quality business in the UK and ensuring people pay a fair amount for public services. Cutting down on tax avoidance strikes me as great party conference PR but ultimately it’s a minefield. Amidst all these conflicting interests and arguments it’s hard to quantify their success/failure anyway which itself is most convenient don’t you think?

Exchequer, Government, ISA, Legal Tax avoidance, Nick Clegg, Philip Green, Tax, Tax Avoidance, Taxation, Taxation 2, Venture capital, William Hepworth