Councils Attacked over Tax Avoidance

Daily Mail (London), September 5, 2012 | Go to article overview

Councils Attacked over Tax Avoidance


Byline: Kirsten Johnson

SCOTTISH councils have been accused of tax avoidance.

About two-thirds of local authorities have set up 'arm'slength' charitable trusts to run facilities such as theatres, sports centres and museums.

The trusts do not have to pay VAT or business rates, meaning councils can substantially cut costs.

But they have come under attack over the policy, which is becoming more common as public bodies look at ways of saving money during the spending squeeze.

Businesses, celebrities and public figures have also been criticised in recent months for finding ways to avoid tax.

Public services union Unison said council officials have a 'moral question' to answer about whether tax avoidance is acceptable.

Scottish secretary Mike Kirby said: 'There has been a rapid expansion of the use of arm's-length bodies to deliver local authority services and little scrutiny of their impact.

'Our experience across the UK is that there is little evidence of service improvements and the driving force behind setting up trusts is to save money via avoiding VAT through obtaining charitable status.

'No matter what statements are made in papers proposing moves to trusts, the key driver is cost savings.' Referring to research south of the Border suggesting that the move to set up trusts was 'mainly a response to funding difficulties', Mr Kirby said: 'Where there have been savings, it is through exemptions for nondomestic rates and VAT.

'There is no guarantee that the Treasury will not move to close this loophole in future or that an independent Scotland will continue with a similar exemption.

'There is also the moral question as to whether public bodies should indulge in tax avoidance.' Unison officials have estimated that setting up the new organisations can cost taxpayers hundreds of thousands of pounds a year.

Allegations that Take That star Gary Barlow used a tax avoidance scheme led to a public outcry, while comedian Jimmy Carr was forced to admit to 'a terrible error of judgment' by using a tax avoidance scheme following criticism by David Cameron. …

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