Monday, 25 June 2012

Avoid Tax - Work as a Waitress in a Cocktail Bar

An old joke goes like this.

A man says to a woman "Would you sleep with me for £1 million"
The woman replies "of course"
The man then says "Would you sleep with me for a pound"
And the woman replies "Certainly not, do you think I'm a prostitute"
He replies "We've established what you are, we're just negotiating the rate"

How on earth is this relevant to the tax evasion / aggressive avoidance debate? I was in a restaurant the other day and when I came to pay the bill and punching in my debit card details I was expecting the "would you like to pay a gratuity screen" to pop up. It didn't. I gave the waitresses a tip in cash explaining I couldn't do it on the machine. She said that was right and they all disable that feature on the payment card machine so they can pocket the tips without having to pay tax on it. Never mind tax avoidance this was blatant tax evasion. Based on spend in the hospitality industry on restaurant covers it appears that even the legal efforts of some celebs to pay as little as they can get away with is small beer compared to the combined might of the massive tax evasion potential of waiters and waitresses. There is, actually, no such thing as tax avoidance. Tax rules are so fantastically complex resulting in a plethora of legal ways to pay tax so any informed person merely finds and, of course, exploits, the most efficient way of complying with draconian tax laws whether it's an A-list celebrity or someone working as a waitress in a cocktail bar. The only difference is the degree of avoidance or evasion, the proportion compared to income could easily be the same. The way to clamp down on tax avoidance is to massively simplify the tax system and a non-progressive flat rate of income tax would be an excellent start. Simplification would also massively reduce the head count at HMRC. Head count reduction is already underway, the Coalition just needs to do the next step and reduce the tax rule book.