Hello, my name is Ms. Wyatt, and I am so pleased that you could join us here today for our citizenship lesson.

Welcome to today's lesson on, "Can Taxes Be Avoided?" from the unit, What Has The UK Economy Got To Do With Me? By the end of today's lesson, you will be able to explain how tax avoidance affects the UK economy, and why paying tax is everyone's responsibility.

We will be using the following keywords in today's lesson.

These keywords are tax, tax avoidance, and tax evasion.

Tax are the charges imposed by the government on citizens and corporations to finance some of its spending.

Tax avoidance are legal methods of avoiding paying as much tax as possible, and tax evasion is illegal methods of avoiding paying tax, punishment with fines or imprisonment.

Some of these key words may be new to you today, but please don't worry as I'm here to guide us through them and we'll be using them a lot in the lesson.

So our lesson is broken up into two parts today with the first part exploring how does tax avoidance affect the UK economy, and the second question looking at is it our responsibility to pay tax? So when you're ready, let's start to begin to look at how does tax avoidance affect the UK economy? Taxes provide funding for public services such as healthcare, education, and infrastructure.

However, not everyone contributes equally, and some individuals and businesses use legal methods to reduce their tax payments.

Others break the law and use illegal methods to not pay tax at all.

This raises big questions about fairness and the impact on the economy.

Tax avoidance is when individuals or businesses use legal ways to reduce the amount of tax they pay.

So because it's legal, it is allowed.

While it is legal, it is bending the rules and can still have serious effects on the UK economy and the country.

Tax evasion is illegal.

It happens when people or companies lie about their income to avoid paying tax, and there can be serious fines and punishments Involved with tax evasion.

The law states that tax evasion is a crime and people found guilty can face heavy fines or even prison.

In the Finance Act of 2024, the maximum prison sentence for tax evasion was doubled from seven to 14 years.

So if you are found doing tax evasion, you can end up in prison for 14 years.

Tax avoidance cannot be made illegal because all the means used to avoid tax are legal loopholes.

However, the Finance Act did bring in new strategies to try to prevent it.

This included schemes to disqualify businesses who are promoting tax avoidance programmes.

Jun is talking about the Finance Act 2024 Do you agree with Jun? So Jun says, "I think the law should have stayed at seven years imprisonment for tax evasion.

I think 14 years is really extreme and not suitable for the crime." So we've heard what Jun's got to say.

Do we agree with Jun or not? Let's pause the video and have a think about whether we do or we don't agree with Jun and why might we think this way? Okay, so hopefully we've had a think now whether we agree or disagree with Jun.

You might have disagreed and said, well, it's vital that we pay tax otherwise things like education and healthcare suffer, and the longer prison sentence will deter people from doing the crime in the first place.

It makes it more serious now, doesn't it? Moving it from seven to 14, doubling it.

One major effect of tax avoidance is that it reduces the amount of money the government has to spend on public services.

Taxes help fund things like the NHS, schools, roads, and emergency services.

If large businesses or wealthy individuals avoid paying their fair share of tax, the government might not have enough money to provide these services properly.

For example, some big multinational companies have been criticised for moving their profits to countries where they pay less tax instead of paying what they owe in the UK.

So this is an example of tax avoidance.

Big multinational companies moving their profits to countries and opening banks in those countries where they pay less tax.

This means less money to employ nurses, doctors, teachers, paramedics, and police officers.

So even though that multinational company will be doing well in terms of money and profit, everything else will suffer, the UK economy will suffer.

Another impact of tax avoidance is that it makes the tax system unfair.

Ordinary workers who are on a salary cannot easily avoid tax because their earnings are automatically taxed through PAYE.

Pay as you earn, okay? So that's what it stands for.

However, some people and businesses use loopholes to reduce their tax bill.

This creates inequality because it means that people who earn less ends up paying larger proportion of their income in tax compared to those who can't afford accountants to help 'em find the loopholes to avoid it.

So this can lead to frustration and mistrust in the system as people feel like the wealthy are not contributing their fair share.

So let's check our understanding so far.

Can we fill in these two blanks with one of the options below? So we have a sentence that we need to fill in the blanks with.

So we have A, B, and C as options that will fit into our sentences.

We just need to work out which ones actually fit.

So is it A, equal and evasion, B, unequal and tax gaps, or C unfair and services? Pause the video, read the sentence through, and work out if it's A, B, or C that are gonna help us fill our gaps.

Okay, hopefully we've had enough time to do this.

So we should have said, tax avoidance makes the tax system unfair and reduces the money spent on services so there will be less funding available for communities.

So if we said C unfair and services, we would be correct.

Well done if we got that right.

Tax avoidance can also harm small businesses.

Large companies that avoid tax have more money to invest in growing their business, while smaller businesses that pay full tax may struggle to compete.

So perhaps our local shops, our general stores, things like that.

They might be small businesses and this tax avoidance that some big multinational companies are doing is harming them.

For example, if a big online retailer avoids tax while a local shop has to pay all its taxes, the local shop might not be able to afford to lower its prices or expand.

This can lead to job losses and harm local economies.

When big companies avoid tax, they can dominate the market and push smaller businesses out, leading to fewer choices for consumers.

Now, the UK government has tried to tackle tax avoidance by introducing stricter rules and closing loopholes, but it remains a problem.

One example is the General Anti-Abuse Rule, or GAAR, introduced in 2013.

This is meant to stop people from using artificial ways to avoid tax.

There have also been campaigns to make tax more transparent, such as requiring big companies to publish how much tax they pay and make it public knowledge.

However, tax avoidance is still a major issue and many people believe more needs to be done to make the system fairer.

If tax rules were followed by everyone, the UK would have more money to invest in important public services and support people in need.

Jun says, "Tax avoidance sounds really bad for the UK economy, which means it's bad for all of us." Sophia says, "Yes, it is Jun.

The scariest thing is the UK loses so much money every year to tax avoidance and tax evasion, so people not paying tax is a really serious problem that the government will have to continue to deal with." The government call the money they do not receive due to tax avoidance and tax evasion a tax gap.

For example, in 2023 to 2024, the tax gap was 39.

8 billion Pounds.

Imagine how many things locally and nationally could be provided for communities with this amount of money.

So there is a tax gap in the year of 2023 to '24 of 39.

8 billion Pounds.

Just to reiterate this point, all that money that could have gone on helping fund the NHS, police, education services, and it's all because people are using tax avoidance strategies or tax evasion.

However, the tax gap has fallen significantly since 2005.

Amendments to the Tax Avoidance Schemes Regulations in 2021 have helped the government use new ways to crack down on tax avoidance, including introducing new computer programmes to analyse tax returns.

So let's match the legislation with its purpose.

So we have the Finance Act, the General Anti-Abuse Rule, or GAAR, tax avoidance schemes regulations.

So what do they do? What do these legislations do? What is the purpose of them? So let's pause the video and have a go at matching the legislation to its purpose.

Okay, hopefully we've managed to do that as the choices were on the screen.

So the Finance Act we should have matched up to extended prison sentence from seven to 14 years for tax evasion.

So it was doubled.

The General Anti-Abuse Rule stops people using artificial ways to avoid tax, which leaves us with the tax avoidance schemes regulations, introducing computer programmes to analyse tax returns.

Well done if we matched those correctly.

Josh avoids paying tax as much as he can, and he's thinking of not declaring his income and invading tax altogether.

Convince Josh that tax avoidance and tax evasion are not the right things to do by explaining how it affects the UK economy and how it would affect him.

So we need to try and convince Josh not to actually do tax avoidance and tax evasion, and we need to try and convince him that he needs to declare his income altogether.

So let's pause the video and have a go at telling Josh how it affects the UK economy by avoiding tax, and how it would affect him.

Okay, so our answer might sound something like this.

Josh, you really shouldn't avoid paying tax at all, let alone evade it.

It can significantly negatively affect the UK economy because it stops public services getting enough money, which affects everyone.

It encourages inequality and this can lead to frustration and mistrust within the system, as people feel like they are not contributing their fair share.

You could also end up in prison for up to 14 years for tax evasion, and the government could use the tax avoidance schemes regulations to analyse tax returns to track people avoiding tax.

So you could get into a lot of trouble.

Therefore, please start paying properly, Josh.

Josh just needs to show and be honest with how much income he is receiving and actually pay tax, and then these sort of problems wouldn't be happening.

So well done if we've managed to convince Josh about how it affects the UK economy by him evading tax and avoiding tax.

We have now explored the question of how does tax avoidance affect the UK economy, and we're going to start to look at now is it our responsibility to pay tax? So most UK citizens recognise that there are many benefits from living in this country and being a UK citizen.

Free education and healthcare are things that some other countries do not provide.

Benefits, welfare payments, and similar are not globally universal.

So not everywhere, not every country offers this.

For example, in the UK we have a right to stay in education or training until we're 18.

This is not the same in other countries who only provide free education up to 16 years old.

For example, in France.

The NHS is free to access for everyone in the UK.

With the right to access these services comes a responsibility to contribute towards them.

Taxation is a key part of how the UK economy functions, ensuring that essential public services like healthcare, education, and emergency services are available to everyone.

This allows the government to balance the country's budget.

Paying tax is a fundamental civic duty, and this means that every citizen has the responsibility to pay it.

Taxes provide the government with the funds needed to support the NHS, schools, roads, and emergency services, which all rely on tax revenue to operate.

Think about how much in your life you use things like the NHS, your school, roads, emergency services, policing.

These all rely on tax revenue in order to be able to work.

Without taxation, these services would struggle to function leading to lower quality healthcare, fewer educational opportunities, and a weaker infrastructure.

Taxation is not just a financial obligation, but a civic duty that ensures society runs smoothly.

So let's have a go at arranging these arguments for and against paying tax.

So we've got eight arguments which you need to work out, are they for paying tax or against paying tax? Now we've got a little hint here and it says the scale isn't equal.

So one of the scales either for or against is going to be heavier than the other.

So which list is going to be longer than the others? This is your job that you need to work out.

So pause the video here and have a go at arranging the arguments into for and against paying tax.

Okay, hopefully we've had enough time now.

We've managed to arrange these arguments into for and against paying tax.

So let's start with our against.

So we have against paying tax.

Fewer educational opportunities, paying for the healthcare at the point of access gives more control.

And then on the other hand, it is our civic duty as UK citizens, it helps to balance the budget, it makes public services available to everyone, and with rights come responsibilities.

So we've got this so far.

Okay, so at the minute, our for is heavier.

Against, it could make the infrastructure weaker.

For, it is an essential part of the economy.

So we have a heavier side for paying tax rather than against paying tax, and this is because obviously, with rights comes responsibilities.

It's an essential part of the economy, helps balance the budget, it's a civic duty, and it makes public services available to everybody.

Well done if we got these right.

Public services are not free to provide.

They are funded through taxation.

If individuals choose to avoid or evade tax, they are still benefiting from public services, but without contributing their fair share.

Do we think that's fair? This raises ethical concerns about fairness and equality, as those who do pay taxes end up supporting those who aren't paying taxes.

In some countries, taxation is much lower or even non-existent.

For example, 17 countries have no income tax including the United Arab Emirates and Monaco, which attracts wealthy individuals and businesses.

However, these countries often have alternative ways of generating revenue such as high value added tax, which is VAT, you might know it as, on goods, heavy reliance on oil wealth, or strict residency requirements.

So in contrast, the UK operates on a system where taxes are collected to provide universal public services.

While people in tax-free countries may pay less to the government, they often do not receive the same level of free healthcare or education that UK citizens do.

Taxation is also a way of ensuring that society as a whole takes care of its most vulnerable members.

Countries with low taxes often have weaker social safety nets, meaning that people in financial difficulty may not have access to free healthcare or support.

In the UK, taxes help to fund welfare benefits, pensions, and support for those people who need it.

By paying tax, individuals contribute to a system that provides for those who need it most, reinforcing the idea that taxation is a shared responsibility.

It's part of being in a society.

So let's have a go at choosing the correct word to complete each sentence about the responsibility UK citizens have to pay tax.

So we have four sentences.

So the first one says, if individuals choose to either avoid or pay tax, they are still benefiting without contributing fairly.

So which one makes sense? Then we have not paying tax means society is not equal or free.

Countries like France or Monaco do not pay income tax.

Which one is it? Paying tax helps the most vulnerable, so we have a shared or individual responsibility in society to do so.

So let's pause the video and choose the correct word to complete the sentences about the responsibility UK citizens have to pay tax.

When you're ready, pause the video.

Okay, so let's go through which were the correct words then.

So the first one, if individuals choose to avoid tax, they are still benefiting without contributing fairly.

Next one, not paying tax means society is not equal.

Countries like Monaco do not pay income tax, and paying tax helps the most vulnerable so that we have a shared responsibility in society to do it.

So we should have picked avoid, equal, Monaco, and shared.

Well done if we did that correctly.

Ultimately, taxation is a fundamental part of being a responsible citizen.

While it is natural to want to keep more of your earnings, taxes ensure that public services remain available and that society functions effectively.

Countries with lower tax rates often rely on private healthcare and education systems, meaning that those who only can afford it receive quality services.

For instance, the United States of America.

In contrast, the UK's tax-funded economy provides access to essential services for all regardless of your income.

So regardless of your job and how much you earn, those tax funded services are free to all.

Additionally, taxation helps respond to national crises such as funding furlough schemes during the COVID-19 lockdowns or providing disaster relief after extreme weather events.

Without a fair tax system, the country would struggle to support its citizens in times of need.

Paying tax is not just a legal obligation, but a civic duty that strengthens both individuals and the wider community.

I'm hoping we're starting to see the answer to our question of is it our responsibility to pay tax? To summarise, some of the reasons why we should pay tax include because it is the law so it's a legal obligation, it's a key part of being a British citizen, it's a civic duty, it's used to pay for essential government spending on a variety of areas like health and education, often carefully calculated to be within the means of those paying it.

So depending on how much you earn depends on how much you get taxed.

Allowing everyone access to essential services, encouraging the values of fairness and equality, protecting the most vulnerable members of society, and part of balancing the economy so we can respond to emergencies.

So, our task is to try and work out where the mistakes are in this paragraph.

So the paragraph says we should pay tax because it's a rule.

It's part of being a global citizen.

It is used for our personal spending.

Tax allows some people to access public services, it encourages the values of inequality and fairness.

It harms the most vulnerable in society and doesn't help in emergencies, it balances the UK family units.

Quite a lot of mistakes in this paragraph.

So let's have a go at pausing the video and having a go at identifying and correcting these mistakes.

Okay, so we've corrected these mistakes now.

So our paragraph should say we should pay tax because it is the law.

It is part of being a UK citizen, not a global citizen.

It is used for the government spending, not personal spending.

Tax allows everyone to access public services.

It encourages the values of equality and fairness, not inequality.

It protects the most vulnerable in society and does help in emergencies.

It balances the UK economy.

So if we've corrected those mistakes, well done us.

What we're gonna do now is we're gonna have a go at completing the mind map of reasons why it's our responsibility to pay tax in the UK.

So I want you to jot down some reasons why we should pay tax in the UK.

Pause the video and have a go.

Okay, it's time for our answers.

You might have included some of mine.

So it's our civic duty as UK citizens and part of law, with rights of free services does come responsibilities, allows the government to balance the budget, it promotes a fair and equal society, it allows us to take care of vulnerable members of society, it helps us to respond to national emergencies.

There's lots of reasons why it's our responsibilities to pay tax in the UK.

Now, would you prefer to never pay tax but to have to pay for public services like healthcare? So what do we think about this? So this is up to you.

I would like you to explain your answer in one paragraph however.

So would you prefer to never pay tax but have to pay for public services like healthcare? Pause the video and have a go at explaining your answer to this question.

Okay, I'm really interested to hear and see what you've put down.

We have put down an answer and yours might look like ours, but it also might not.

So we've said a system where people pay directly for essential services instead of taxation could lead to inequality as not everyone can afford healthcare, education, or emergency services.

So I would prefer to pay tax than have to pay for public services.

In the UK, the NHS ensures that everyone has access to medical treatment regardless of their financial situation.

But in countries without public healthcare like in the US, people without insurance can be denied treatment.

If services like education and policing were only available to those who could pay, it would create a society where only the wealthy have access to basic needs, while the poorest would struggle.

Taxes ensure that everyone contributes based on their ability to pay, creating a fairer system that supports the whole community rather than just those who can afford it.

Now you might have been agreeing with that answer, or I would prefer not to pay tax and instead pay directly for services like healthcare, education, and infrastructure.

The system would allow individuals to have more control over their money and choose the level of service they want.

For example, in countries with private healthcare like the US, people can pay for faster treatment and higher quality care if they can afford it.

Businesses might also benefit from lower tax rates, encouraging investment and economic growth.

In this system, those who earn more would not have to contribute to services they do not personally use.

Making the system seem fairer to those who want more financial independence.

So you might actually think, hmm, my opinion agrees with this more.

It's up to you.

Would you prefer to pay tax but have to pay for things like public services and healthcare? Hopefully we've managed to justify our reasoning and opinions.

We've now come to the end of our lesson on "Can Taxes Be Avoided?" and so we're gonna summarise it for you.

Taxes fund essential public services like healthcare, education, and emergency services, ensuring they are available to everyone.

Tax avoidance is legal but reduces government revenue, while tax evasion is illegal and can result in fines or imprisonment.

Paying tax is a civic duty that ensures fairness as those who earn more contribute more to support society.

Some countries have no income tax, but they often rely on high VAT or private services, which can make healthcare and education expensive.

Without taxation, only those who could afford to pay directly for services would have access, leading to greater inequality in UK society.

So I'm hoping this lesson has managed to answer the question of can taxes be avoided, and we've learned some valuable lessons about tax evasion, tax avoidance, and actually paying tax.

Thank you for your contributions and efforts in this lesson and I hope to see you in the next one.

Bye-bye.