Gill Marcus gives you her views on black hole policies
I refer to the criticism by Magnus Heystek of my reaction to the so called black hole policies.
It is trite to suggest that there is a lack of understanding of the distinction between tax evasion and tax avoidance.
Clearly the fraudulent practices which make up tax evasion must be dealt with differently from tax avoidance for they are tantamount to criminal activity.
The black hole policies were obviously not tax evasion, but a form of tax avoidance.
Accordingly I never branded such practices criminal.
However, the practice of insurance companies in marketing black hole policies ensured a safe haven for interest earning income which would attract a lower rate of tax.
By the use of these policies, substantial sums of income were placed beyond the reach of the Receiver of Revenue in circumstances which could never have been contemplated by the receiver when the various sections of the Income Tax and Insurance Acts were drafted.
The suggestion in the criticisms is that government can never alter legislation or plug loop holes which erode the tax base once the initial legislation has been drafted.
Thus, those fortunate enough to make use of these policies will pay a lower rate of tax while the balance of society will have a greater tax liability.
When the tax base is being eroded no government can simply sit idly and look on.
Either it can launch an s103(1) attack or deal more expeditiously and prospectively by advising that legislation will be introduced, if necessary, to reduce such practices.
Now that we have an improved s103(1), the Receiver can be expected to invoke its legal powers more vigorously and consider litigation against the type of practices, such as second-hand policies, which have not met with unanimous approval from tax counsel.
The solution to such tax avoidance is to advise that legislation will be introduced, if necessary, to curb such practices.
As long as the legislation is prospective, there can be no objection to it.
All that happened with the black hole policies was an announcement that such practices should not continue, and that if they did, the necessary steps would be taken to curb such practices.
There was no suggestion that any fraudulent activity was involved.
What I have done, as part of a responsible governmental reaction, is to announce that prospective steps will be taken to ensure that such avoidance cannot continue in the future.
It is of concern that criticism is expressed at our efforts to protect the tax base by the same critics who complain our tax rates are too high.
Unless government can curb such avoidance, there will always be pressure on our tax rates and the tax burden will fall disproportionately on those who are unable to make use of such schemes.
The suggestion by Mr Heystek that counsels' opinion that the policies are legal and hence should be immune from the Receiver's attention misconstrues the meaning of legality.
If a court rejects a Receiver of Revenue attack such as under s103(1) then the situation is legal, but even then it is open to the Receiver to introduce prospective legislation.
It is these "twin" avenues of more vigorous applications of s103(1) and prospective legislation to deal with loop holes that will be pursued by government in order to reduce the erosion of the tax base.