Pop star under fire for tax avoidance scheme

Taxing times : Some are calling for Gary Barlow to return his OBE award © PA

The UK prime minister has criticised pop singer Gary Barlow after his role in a giant tax avoidance scheme was revealed in court this week. Should the star be forced to repay millions?

He is one of Britain’s most successful songwriters; a pop star adored by his fans for songs that propelled the 90s boy band, Take That, to global fame.

But this week it is Gary Barlow’s reputation that is under the spotlight, after a judge ruled that the singer was part of a giant tax avoidance scheme.

Barlow, along with two other members of Take That and their manager, avoided paying tax on about £63m earned from tours and CD sales. They did this by paying money into a scheme that masqueraded as an investment fund for the music industry. In reality it was an elaborate system designed to hide their money from the taxman. They will now have to pay back millions to the Exchequer.

Tax is how the government raises money to pay for public services, such as schools and hospitals. Individuals and businesses must pay a proportion of their income to the government, although the rate varies. Not declaring earnings that are liable for tax is known as tax evasion and is illegal. But declaring earnings while finding ways to pay very little tax, as in Barlow’s case, is known as tax avoidance. Although it is not illegal, it is highly controversial.

If HM Revenue and Customs (the government body responsible for collecting tax) believes that a person is paying less than they should, a tribunal will decide whether tax avoidance is occurring. In some cases, avoidance can be illegal too if it is discovered that someone has lied or concealed the facts.

Many people believe that tax avoidance is morally wrong, and even the prime minister, David Cameron, has criticised Barlow. Some people want him to return the OBE awarded to him for his services to charity and the music industry.

In recent years, public anger over tax avoidance has grown. Companies llike Starbucks, Google and Amazon have all been criticised for paying too little tax. In 2012, Starbucks made sales of £400m in the UK but paid no corporation tax at all. Last weekend, it was revealed that the online retailer Amazon paid just £9.7m in corporation tax in Britain last year, despite making a record £4.7bn.

So has Barlow done anything wrong?

Give back, Take That

Not according to some. Tax avoidance is legal and no one should pay more tax than is required by the law, they say. It is up to the government to simplify the tax system and close loopholes. Until that happens, why shouldn’t successful public figures hold on to their hard-earned cash?

But although it may not be legally wrong, tax avoidance is morally wrong, argue others. Tax avoiders undermine the economy and damage public services. Refusing to pay taxes in a shared community is unfair and infuriating, particularly if those doing it earn vast sums of money.

You Decide

  1. Should Barlow hand back his OBE?
  2. Is tax avoidance morally wrong?

Activities

  1. In groups, make a list of the pros and cons of tax avoidance.
  2. Write a 400-word essay about whether you think the tax system should consider the interests of the individual first or those of society as a whole. Give your reasons.

Some People Say...

“There is no such thing as a good tax.’Winston Churchill”

What do you think?

Q & A

I don’t pay tax so how does this affect me?
You may not pay tax now, but when you start your first job, you probably will. It will suddenly seem very relevant how much money you have to pay to the government from your salary compared to everyone else, and whether what other people pay is fair. Paying tax is part of the social contract which binds us altogether, paying for vital public services which we all use. Understanding tax is an important part of understanding how society works.
How big a deal is tax avoidance?
It’s big business and dreaming up tax avoidance schemes for rich clients earns tax lawyers and accountants huge sums of money. But the effects on the UK economy are severe. They cost the taxpayer £4bn a year, according to the latest figures from Her Majesty’s Revenue and Customs.

Word Watch

Exchequer
The UK government’s department responsible for all tax and revenue matters. The current chancellor of the exchequer, responsible for all financial and economic policy, is George Osborne.
Rate
For the last tax year (which runs from April to March) in 2012-13, there was no tax to pay on the first £8,105 of anyone’s earnings. After that the rate was 20% tax on the next £31,865 earned. Beyond that the rate rose to 40% tax on earnings up to £150,000. Anything above that was charged at a rate of 45%.
People
Margaret Hodge, the chairwoman of the Commons Public Accounts Committee which investigates corporate tax avoiders such as Google, Amazon and Starbucks, suggested that Barlow should give back his OBE.
OBE
An Order of the British Empire is awarded by the queen to an individual who has made a notable contribution in a specific field.

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