Tax Avoidance by the Wealthy: Why It Matters and What Must Change

1,033 words, 5 minutes read time.

Tax avoidance has become one of the defining issues of our time. At its heart lies a simple truth: while most people have little choice but to pay what they owe through PAYE or straightforward self-assessment, many of the wealthiest individuals and corporations operate in a completely different world. In that world, clever accountants and lawyers work full-time to ensure their clients contribute as little as possible to the societies that made their fortunes possible. This isn’t about illegality—at least not usually. It’s about exploiting the rules, pushing them to their limit, and reshaping them through influence when they become inconvenient.

The difference between tax evasion and tax avoidance is important, but it’s also part of the problem. Evasion is illegal: hiding income, lying to HMRC, stashing undeclared wealth offshore. Avoidance, on the other hand, uses legal methods—loopholes, technicalities, complex ownership structures, and international mismatches in tax law—to reduce tax bills. But just because something is legal doesn’t make it right. In fact, aggressive tax avoidance undermines public trust, poisons the social contract, and leaves public services stretched while ordinary people carry more of the load.

How the Wealthy Avoid Tax

The techniques used by the very rich are often breathtaking in their audacity and complexity. These can include:

• Offshore trusts and shell companies, often based in tax havens like the British Virgin Islands, Jersey, or the Cayman Islands. These structures obscure ownership, sidestep tax liabilities, and make accountability all but impossible.
• Intra-group transactions by multinationals, where profits are shifted between subsidiaries to jurisdictions with little or no tax.
• Share-based remuneration and capital gains strategies that convert high-income tax liabilities into lower-taxed capital gains or dividends.
• Phantom loans—where a UK-resident company borrows from an offshore affiliate to create artificial interest deductions and reduce profits.
• And in some cases, exploiting government incentives or reliefs—R&D tax credits, investment allowances, and more—for purposes that bear little relation to the spirit in which they were intended.

These aren’t isolated cases. This is how much of the global tax system functions at the top. The result? Individuals worth hundreds of millions pay less tax proportionally than nurses, teachers, or small business owners.

Who Pays Instead?

The answer, of course, is everyone else. When the wealthiest avoid their share, that burden doesn’t disappear—it shifts. It shows up in underfunded NHS services, in councils forced to cut vital care and housing support, in the struggling education system, and in higher taxes for working people. HMRC still needs to collect revenue. So VAT rises. Council tax goes up. National Insurance bites deeper. The whole structure becomes regressive—meaning the less you earn, the more you pay as a proportion of your income.

What’s more, tax avoidance entrenches inequality. When wealth is hoarded in family trusts, shielded from inheritance tax and reinvested tax-free, it creates dynasties of unaccountable power. It undermines the idea that we all contribute according to our means. And it reinforces the perception—sadly too often accurate—that the rules are rigged for those who already have the most.

Why Is HMRC So Soft on the Rich?

Many ask why HMRC doesn’t simply crack down. In part, the problem is resourcing. Over the last decade, the department has been hollowed out, with experienced tax inspectors laid off and regional offices closed. At the same time, the tax affairs of the very wealthy have become ever more complicated, requiring forensic expertise to unpick.

But it’s not just about money. It’s also about priorities. Small businesses and ordinary taxpayers are far easier targets. They lack the resources to fight back or appeal. By contrast, a multinational or billionaire can delay, obfuscate, or mount a long and costly legal defence. That leads to a perverse situation where those with the most pay the least—not because they are more honest, but because they are better defended.

Influence and Lobbying

At the root of this problem lies political influence. Major accountancy firms, law firms, and financial institutions don’t just implement tax avoidance strategies—they help shape the very laws that make them possible. Whether through secondments to HMRC, positions on advisory boards, or direct lobbying of government, these actors ensure that loopholes stay open and that reform is limited to superficial tweaks.

The result is a kind of regulatory capture: the fox is not only guarding the henhouse—it’s helping to write the rules on coop design. That’s why genuine reform has been so slow to come.

What Can Be Done?

None of this is inevitable. There are practical, achievable steps that could help restore fairness and integrity to the UK’s tax system. These include:

• A real General Anti-Avoidance Rule (GAAR): A principle-based law that allows HMRC to strike down abusive schemes, even if they technically follow the letter of the law.
• Country-by-country reporting: Forcing multinational companies to disclose where they make their profits and where they pay tax—exposing profit-shifting in the process.
• Public registers of beneficial ownership: So that trusts and companies can’t hide behind anonymous nominees or shell entities.
• Stronger resourcing for HMRC’s high net-worth unit, including hiring specialists to audit the most complex avoidance schemes.
• Whistleblower protection and incentives: Making it easier for insiders to come forward with evidence of abusive practices without fear of retaliation.
• An end to the revolving door between major accountancy firms and the Treasury/HMRC.

These measures are not radical. Many have been proposed by tax justice campaigners, economists, and even former insiders. What’s lacking is not ideas—it’s political will.

A Matter of Principle

At its core, tax avoidance by the rich is a moral issue. It’s about whether we accept a two-tier society: one where the majority pay what they owe, while a privileged few game the system. It’s about what kind of country we want to live in—one built on fairness, contribution, and solidarity, or one where wealth buys exemption.

Ending tax avoidance won’t solve every problem. But it would send a powerful signal that everyone plays by the same rules. That in a civilised society, those who benefit the most also give the most. That we value shared responsibility over individual cunning.

And that is a principle worth fighting for.

By Maria Camara