7 March 2013 Peter Gouw - Tax from a Lighter Fun Side

Rotarians learn about the lighter side of tax

It is entirely the fault of Napoleon Bonaparte's ambitions and war mongering that income tax was first introduced in Great Britain (but not Ireland) in 1799 to help pay for the cost of the war.

Glasgow-based tax expert Peter Gouw told members of the Bridge of Allan and Dunblane Rotary club and guests from Cumbernauld and Pitlochry clubs at the meeting on Thursday evening that the measure was only meant to be temporary. Following a truce it was subsequently repealed but only for a short time - once it was clear that Napoleon's ambitions were not to be thwarted. It was then very swiftly reintroduced until after the Battle of Waterloo (1815).

Eventually Sir Robert Peel re-imposed income tax in 1842, again as a temporary measure that has never been repealed. Yet quirkily, in parliamentary law Income tax is still a 'temporary' tax that expires each year on 5 April and Parliament has to reapply it by an annual Finance Act!

Mr Gouw also talked about some aspects of tax avoidance and how interpretation of where a company is actually based, irrespective of trading locations, currently dictates whether or not it pays taxes in the UK.

And tax avoidance has been around for a long time. He cited a case in 1929 when a UK citizen travelling in Germany bought one million toilet rolls that he subsequently sold to one source, while he was still there. "He took his case to court claiming tax exemption because as it was an isolated transaction and not selling to a number of outlets it therefore couldn't be seen as trading," he said. "Unfortunately the judge thought otherwise as the man had sold them at a profit, which was deemed to be income."

"Temporary or no," Mr Gouw quoted the words of US statesman/economist Benjamin Franklin, who said in the 1700s: "In this world nothing can be said to be certain except death and taxes". How prophetic were his words!