The Taxmen, The Bank and The Rat

Getting together this piece about the IRS/UBS row over tax -  triggered by the treachery of one Bradley Birkenfeld, left, a man who makes Judas Iscariot look like a Saint -  it seemed to me that in essence the whole thing comes down to two words: Freedom or Tyranny.

Those are dramatic words,  but this latest attack on the personal money of the

individual is a pretty dramatic affair.

In the violent slugfest between the IRS, the tax collecting arm of the United States Government, and the Swiss Bank UBS, specialising in wealth and asset management,  we seem to be seeing a clear attempt by one side, aided and abbetted by the OECD,  to do away with the long accepted distinction between tax avoidance and tax evasion - to the detriment of every one of us, rich or not.

Bear with me, because this is the boring bit where we have to define our terms.

In any civilised country,  two elements of the tax system have always been recognised - Tax Avoidance and Tax Evasion.

Tax Avoidance is legal. Tax Evasion is not.

To put it simply, Tax Avoidance is me exercising my god given right to hang on to my hard earned money and not hand over unreasonably large chunks of it to a bunch of greedy politicians.

Tax avoidance is the legal exploitation of the tax system, to try and reduce the amount of tax that is payable by means that are within the law, while at the same time - and this is the relevant bit to the present row - making full disclosure of income to the tax authorities.

Examples of tax avoidance are, for instance, using tax deductions, changing ones business structure through incorporation, or establishing an offshore company in a tax haven.

Tax Evasion, however, involves deliberate efforts by individuals, or firms etc, to evade the legitimate payment of taxes by illegal means.
This usually means taxpayers deliberately misrepresenting or concealing the true state of their affairs, and includes dishonest tax reporting, such as underdeclaring income, profits or gains - or overstating deductions.

So, Evasion is naughty. Avoidance is good,  because in a free country money belongs to the people who produce and earn it.

Of course, anybody in their right mind knows a certain level of tax is necessary - a portion of the wealth produced by the population must be given up to pay for the public good - for a decent health service, decent education, a trustworthy system of justice, national defence et al.

But why should we give the government an unlimited claim on our money to use as they see fit? And for what? Corporate bail outs, pet projects, foreign aid - the list goes on and on.

That's why this particular battle makes me nervous.  Not because I'm rich. I'm not - though one day, in a good old capitalist society, I might be.  And then I will want talented people around who will come to my aid and protect me from the grasping hands of my government.

Is there something a touch malevolent about the IRS relentless pursuit of UBS and it's clients?   A sort of old fashioned socialist desire to punish  people for having money? 

Yes, I do know that in this difficult financial landscape, all Governments are scratching round to find every and any source from which they can raise revenue.

And I am not saying the wealthy are perfect - but tell me who is? 

Mr Timothy F Geitner is the Secretary of the Treasury, the American equivalent of the UK's  Chancellor of the Exchequer.  I guess that makes him the boss of the IRS boys.

Do the words 'without sin' and 'casting the first stone' ring a bell, anyone?

more to come -including who are the OECD, and what's in it for them?