The Paradise Papers have highlighted that private jet owners have been bypassing VAT on purchasing their aircraft. Importing aircraft through the EU and shell companies in the British Virgin Islands, the Isle of Man and Guernsey has enabled owners to avoid paying millions of pounds worth of tax.
However, aviation and tax experts maintain there is nothing illegal about these actions and that is the fault of lawmakers, who have allowed this misinterpretation of the system. As with many other business expenses, individuals and companies are permitted to reclaim VAT on items if it is proven they are used for business purposes.
Mark Davies comments that “although it might seem morally wrong for a wealthy person to make the choice to take steps to pay less tax, tax avoidance is not illegal. The problem here is not the wealthy person, it is the fact that the law enables him or her to make that choice. It is the lawmakers – parliament – that are to blame. Paying tax should not be a charitable activity or a moral obligation; it should be clearly and simply defined as a legal obligation.”
“There is only tax avoidance when there is a choice,” he added. “You can choose to avoid tax because there are different ways you can do it. That’s down to the lawmakers. The problem you have is you only have short-term strategy in government – the Chancellor of the Exchequer is only looking at this year’s budget, not five or ten years’ time. There is no concept of wholesale simplification of the tax system to make it easier to tax people. The more complicated you make it, the easier it is to try to avoid paying tax.”
Link to full article in Corporate Jet Investor here: