Presumably we should pass a similar measure for individuals, called a ‘general anti bad behaviour principle’, in case people do things that although not actually illegal just yet, are things of which the government disapproves?

Or we could *stick to the fucking rule of law*, making things that need to be illegal as and when they’re discovered, non-retrospectively, by passing laws in parliament, both on the tax side and more generally…

[troll]
This is a pathetic, stupid and half-baked article from someone with nothing to contribute to our national political life. What’s it doing here?

Crazed. With John B, on the whole rule of law, “innocent until proven guilty” thing. People have gotta have a fighting chance of knowing what is illegal before you charge them with something. It is kinda what makes a government moderately different from a street gang.

Even from a pragmatic perspective, there would be no better way of strangling investment than having to give individuals odds on being charged with tax evasion. But of course, rich people NEVER add anything to a country so I guess you don’t really care about that.

A better approach would be to simplify our tax code which has grown obese over the years, and is a source of many so-called loopholes anyway. In fact, as the Danish/Sweden model demonstrates, you can actually get away with much higher taxes in some areas (though not on corporations), if you make paying it relatively simple and don’t interfere in the labour market too much.

@1.
From my understanding, the GAntiP amendment would actually make the “fucking rule of law” clearer and not as conveniently muddy and open to loopholes benefitting uber corporations.

@2 “Chris”.
Yours is a sixth form barking at someone’s argument without the slightest capacity to back your own.

@4, please explain how moving from “these are the rules you have to follow” to the opposite would make things clearer?

Claude: correct me if I am wrong but it looks like this amendment championed by Richard Murphy is essentially focussed on various tax outcomes. Outcomes that have been achieved by legal means. Now if you outlaw the general outcomes without specifying what means are illegal, then you have added a huge degree of uncertainty into what is now legal and what is not.

It would be a bit like saying:

“There is too much congestion on our major roads, so we are going to fine people when we catch them on our major roads and it is congested. Of course, it is perfectly legal to drive your car wherever you want but should you end up in traffic, you are guilty of causing congestion”

Whereas the sane alternative would be to introduce a toll or something which specifies exactly what people are allowed and not allowed to do.

Tim Worstall explained this point a while back: http://timworstall.com/2009/02/03/a-challenge-from-richard-murphy/

Because it would make it easy to determine what the ‘spirit of the law’ is. It would enpower the courts to interpret the tax laws properly.

At the moment the tax code is open to loopholes. And this discussion can only continueif you’re ready to accept that, which -I may be wrong, but I sense you are not.

As it stands, it is not clear what the spirit of the law is hence the relative ease (for those who can afford top accountants, not old Muggins’ the taxpayer, of course, but these are the little people who should say a Hail Mary at night for being given flat screen TVs and Tescos, arent they?) with which tax is avoided in the UK.

To quote Richard Murphy: “It’s always much better to define a positive goal than to expect a negative to be avoided.”

The Government’s Code of Conduct doesn’t even apply to to the advisers and auditors of banks. Nice, eh?

@6

No, I don’t accept your analogy. I rather see it as:

“If we catch people rat running up a one-way only street, we will analyse whether it was a genuine mistake (i.e. a tourist who got lost) or a clear intention to dodge the streetcode, in which case we’ll act accordingly”.

The issue is to empower courts to interpret the tax laws fully and purposively.

Well, as you imagine, I disagree, I think the best sort of law defines, as precisely as possible, what you are not allowed to do rather than demands adherents enter into some spiritual intentional relationship with it. I suppose I don’t believe in using the law to make people good. It is just not a good tool for it.

I have heard it said that English law tends (or has tended) towards precise specification of offences whereas EU law gives more weight to the intention or spirit of the law rather than its precise wording. If what Claude says @ 9 is correct, is it that an EU-style code or law is being proposed? And the problem that this would not fit with the body of English law?

Case law on tax avoidance vs evasion is already well established, it basicaly boils down to

a) A sceme intentionally designed, from inception, with no purpose other than to avoid paying tax is tax evasion and is illegal (paying your plumber in cash is a simple example of this)

b) Financial planning which is designed to be tax efficient (e.g retaining said plumbers reciept in order to claim tax releif on the maintenence of a rented property) is tax avoidance as is legal.

The idea that tax avoidance is “unfair” is simply ridiculous – it’s like asking people to voulantarily pay more tax than they are required to by law, because it’s “fair”. The
only way to decrease tax avoidance is to reclassify it as tax evasion. And history shows that every time you close one tax “loophole” another one opens. A far better way forward would be to update and simplify the tax system which is full of ridiculous anachronisms (VAT on biscuits, but not cakes, which HMRC spent millions defending, for example),

The problem here is the notion of the “spirit of the law” . If you obey the spirit of the law on say speeding, by driving faster than the limit on an empty motorway in the early hours, but always going at a snails pace past the local school you would still get prosecuted, even though you are within the spirit of the law which is to avoid putting other people in danger. The law in this country stopped having any “spirit” around 1997. Govt can’t have it both ways.

And I won’t mention the flipping of second homes to avoid paying CGT……….

I do agree with Nick, above, but I also think it’s pretty reasonable to expect people and businesses to adhere some form of basic human decency. This kind of law change might be daft, but I think the way we look at tax avoidance is fundamentally screwed up.

After all, if I came up with a scam for borrowing large sums of money while knowing full well that I’ll be able to dick off lenders later by picking holes in their contracts, I’d be legally in the right, but I’d still be a cheat and a liar. OTOH, if everyone did it, the economy would collapse overnight. The only reason society as a whole works is because 99% of the population doesn’t spend every waking second concocting schemes to bend and break the rules to their advantage.

Basically, I see no reason why anyone who stretches and strains every sinew to duck out of the obligations that the rest of us just have to put up with should be lauded as some form of super-special entrepreneurial class, exempt from normal rules of play, rather than being recognised as a shower of chiselling little weasels.

“After all, if I came up with a scam for borrowing large sums of money while knowing full well that I’ll be able to dick off lenders later by picking holes in their contracts, I’d be legally in the right, but I’d still be a cheat and a liar. OTOH, if everyone did it, the economy would collapse overnight. The only reason society as a whole works is because 99% of the population doesn’t spend every waking second concocting schemes to bend and break the rules to their advantage.”

It wouldn’t happen that way anyway. Lenders would stop lending to people who behave like that, out of their own self-interest. It is also why people don’t get large loans (or at least not traditionally) without first having a good reputation, whether informally or in the form of a credit rating. The core of the problem of why tax evasion is different from this is that tax is a coercive activity in which one side has no interest in cooperating with.

“I do agree with Nick, above, but I also think it’s pretty reasonable to expect people and businesses to adhere some form of basic human decency.”

I just don’t see what is so decent about meekly handing cash over to a state that is embroiled in several major conflicts, involving the deaths of thousand, and is in the midst of trying to build up various systems of domestic surveillance and control. Giving any more money than is absolutely minimally necessary to avoid being persecuted in this context, would strike me as ridiculous. If the state behaved a bit better, maybe you’d have a point. But your money really might do more decent things going somewhere else, whether to charity or any other private or commercial actor. I am sure money that is remitted out of this country, for example, goes, in the main, to much more deserving places than the treasury’s coffers.

@14
“Lenders would stop lending to people who behave like that, out of their own self-interest.”

Ah – I love the smell of libertarian horseshit in the morning. If the wealthy chiselling tax-dodgers give the lenders an incentive equal to or greater than the value of their reputation, then the self-interest argument is rendered moot.

And trhe conflicts our government is embroiled in were done at private corporate behest (Halliburton, Bechtel, BP, ExxonMobil, News International etc – all tax-dodgers), not at the behest of government interests.

“Lenders would stop lending to people who behave like that, out of their own self-interest.”

One word: Madoff.

“It is also why people don’t get large loans (or at least not traditionally) without first having a good reputation, whether informally or in the form of a credit rating.”

Another word: Enron.

La la land. Hey…MPs too, most weren’t breaking the law either with their allowances, you know. But I bet you think that was a scandal though.

I don’t see how you can “dick off lenders by picking holes in their contracts” because lenders make sure the contracts are pretty much water tight (try not paying your mortage for 2 months and you’ll see what I mean).

@17

If you can afford an accountant good enough to get you out of paying your taxes, you can afford a lawyer good enough to pick enough holes in a lending agreement to render it unenforceable.

The point you’re not following with your mortgage quip is that the resources to avoid paying up are not available to your average consumer.

I just don’t see what is so decent about meekly handing cash over to a state that is embroiled in several major conflicts, involving the deaths of thousands… etc.

Well, it’s not the first time I’ve seen a heartbreaking appeal to progressive ideals used to cloak the statement I don’t like paying taxes, and it probably won’t be the last. Hey ho.

I think the point is that if, say, Diageo wants to avoid paying large chunks of its taxes, it can do so by throwing massive resources at the problem; also, I suspect that much of the avoidance that goes on has been deliberately enabled by the government after very large businesses exerted their considerable political influlence to that effect.

If I want to avoid paying large chunks of my taxes, then I can go piss up a rope, and that’s it.

@ 18. I’m sure if I ran my mortage past one of our corporates he would tell me to pay up or lose the house.

Agree with you about the accountants but the fact is most people don’t earn enough to make the amount they would potentially save worth the hassle of avoiding in the first place.

A general point, tax that is not paid is still spent or invested in the economy, it doesn’t disappear into a black hole

@20
And I’m sure if you had the money to pay one of your corporates, he’d find a loophole quicy enough.

And the point is that tax that is not paid is not distributed *fairly*, but usually for the benefit of the tax-dodging person or coropration above all else. Great for yacht-builders, not so great for getting everyone’s rubbish taken away, transport network maintained, or hospital care paid for.

” “Lenders would stop lending to people who behave like that, out of their own self-interest.”

One word: Madoff. ”

Uhh, Madoff’s in prison, and I doubt he is going to get any more interested lenders. If banks were actually allowed to fail occasionally, then the role of reputation would be rather larger than it is now too.

” “It is also why people don’t get large loans (or at least not traditionally) without first having a good reputation, whether informally or in the form of a credit rating.”

Another word: Enron.”

Did I mention I am against limited liability corporations? Perhaps we (libertarians) don’t mention that point enough.

“Hey…MPs too, most weren’t breaking the law either with their allowances, you know. But I bet you think that was a scandal though.”

In several cases, they were. But we’re relatively unlikely ever to see them in a court room. But I don’t want to prosecute MPs for activities that aren’t technically illegal. I just want them fired.

To quote Richard Murphy: “It’s always much better to define a positive goal than to expect a negative to be avoided.”

One of the nice things, historically, about English law, is that it provided a list of negatives to be avoided, and then everything else you did was OK. That’s a good thing. It’s liberalism. It’s the essential opposite of fascism, under which you are only allowed to do things that are expressly permitted by the state.

It doesn’t surprise me, given his general grasp of clues, that RM prefers the fascist starting point to the liberal starting point.

As above, I have had a go at Murphy’s calculations. I’ve even seen exactly my argument used in Hansard to point out the flaws (no, not claiming that they actually knew of my argument, it’s an obvious one for anyone to use).

But as to this GANTIP there’s one argument against it which for me is insurmountable. It’s called “the rule of law”.

Government can (and rightly so in principle, it’s the specific things that we argue over) both insist that we do certain things (say, pay taxes, educate our children) and also insist that there are some things we don’t do (murder our neighbours, crap in the streets).

I’ve no problem with that: but the traditional attitude in this country has been that whatever is prohibited or insisted upon must be spelt out in detail. That’s the only way that we the hoi polloi are going to know what we must or must not do at risk of getting banged up.

What we have traditionally not had, at least since the demise of the Star Chamber, are general catch alls. We don’t have laws that say you can be locked up “for bein’ a bad ‘un”. We don’t have laws that say you can be banged up “for taking the mickey”.

We do have laws that say you can be banged up for specific offences: including certain forms of taking the mickey like belting a copper.

Now I do get accused at times of looking back at an England that never was, even then with rose tinted glasses. But I do think it’s true that certain principles that we’ve thrashed out over the past 1,000 years or so are indeed the cornerstones, the keystones, of a certain type of liberty. A type of liberty I think worth retaining and protecting.

Trial by jury, the presumption of innocence, the burden of proof, free speech, free association and, yes, the rule of law. By that last I mean that the rules about what we must do or may not do on pain of punishment must be clear, public and on record. Never should we have a situation whereby the lawmakers or their employees, the bureaucrats, can say “well, that’s not quite what we meant, even though that’s what we said, so off to gaol with you”. That is no longer the rule of law, that is the rule of man: no, not something desirable.

Of course, there is a much simpler objection to the GANTIP. Meacher, is, as an MP, claiming that he and his colleagues are too damn stupid to be able to write the law so that people do what they intend them to do. Thus GANTIP, which is an attempt to compensate for such deficiencies.

Why would any fucker listen to someone stating “I’m too stupid to make the law so pass my law”?

“Well, it’s not the first time I’ve seen a heartbreaking appeal to progressive ideals used to cloak the statement I don’t like paying taxes, and it probably won’t be the last. Hey ho.”

Well you are assuming bad faith in me now. But in truth, I am rather less bothered about how much tax is taken from me (pitifully small as it is anyway) than what it eventually gets spent on.

Presumably we should pass a similar measure for individuals, called a ‘general anti bad behaviour principle’, in case people do things that although not actually illegal just yet, are things of which the government disapproves?

Too late, mate – they’re called ASBOs.

@27 yup, that occurred to me when writing the example. The difference is, at least when you get your ASBO taken out, it provides you with a list of things you’re not allowed to do (and the ones which don’t, because the people taking them out are inept, get set aside in courts), rather than a general injunction to ‘not do bad stuff’.

Well you are assuming bad faith in me now.

In fairness, your point did pretty much reduce all state spending to Splattering innocent foreigners and ZOMFG the cameras, the cameras, are the clocks striking thirteen yet? surveillance equipment, with nary a hospital, road, school or museum in sight. That’s not exactly the textbook example of an argument in good faith, but point taken nonetheless.

“A sceme intentionally designed, from inception, with no purpose other than to avoid paying tax is tax evasion and is illegal (paying your plumber in cash is a simple example of this)”

This is not quite right. Tax evasion involves using illegal means – usually concealment and/or dishonesty – in an attempt to pay less tax. Paying your plumber in cash is fine – it is up to your plumber to report his income, and to charge VAT where necessary. The plumber would be the one evading tax if he deliberately concealed your payment from the tax authorities.

Tax avoidance involves using legal means in an attempt to pay less tax – chosing the less heavily taxed of two options, for example: buying a zero-rated chocolate cake rather than a standard-rated chocolate biscuit, or your company paying you a shareholder’s dividend rather than a employee’s bonus – but it may not actually work. The ability to avoid tax often arises from boundaries in the tax system – when two transactions with a similar economic result are taxed differently. Many of the boundaries are created deliberately for political reasons, to encourage (or discourage) taxpayer behaviour (for example, the short-lived zero percent rate of corporation tax). The politicans get upset when these “loopholes” are “exploited”.

I think it was Judith Freeman (Professor of Taxation Law at University of Oxford) who coined the term “GANTIP” (general anti-avoidance principle) in an article in the Tax Journal in June 2003, in an attempt to distinguish her suggestion from previous proposals to introduce a general anti-avoidance rule (GAAR). Her idea is to avoid adding new prescriptive rules, but instead to legislate an overarching statement of principle – that tax-driven transactions which conflict with or defeat the evident intention of Parliament should be ignored for tax purposes – which the courts can use to strike down offending tax-motivated transactions. (It should be said in passing that recent decisions of the courts have been moving in this direction anyway – the leading cases now require the judges to apply the relevant statutory provisions, construed purposively, to the transactions, viewed realistically. However, the judges often find that overly-prescriptive tax legislation reduces their room for manoeuvre to reach the “right” result.)

There is a lot of helpful background and analysis in “Countering tax avoidance in the UK: which way forward? ” – a paper published earlier this year by the Law Review Committee of the Institute for Fiscal Studies – http://www.ifs.org.uk/publications/4461 The last appendix, looking at the use of these “rules” or “principles” in other jurisdictions (Australia, New Zealand, Canada, South Africa, Netherlands, Germany) shows the limitations – as that paper says, no jurisdiction has found a perfect solution and GAARs are often not very effective – there is no golden bullet – but a new statement of principle could be a way to reduce the plethora of “targeted anti-avoidance rules” (TAARs) that have been introduced in the last 12 years. The report recommends the use of other anti-avoidance techniques – judicial intervention, and increased administrative scrutiny of people know to be using artificial avoidance schemes.

With respect to Mr Meacher, his clause – NC1 available from http://www.publications.parliament.uk/pa/cm200809/cmbills/090/amend/pbc0901905m.9-13.html – is a little rustic (to paraphrase: in determining tax liabilities, if it is estimated that steps have been included for the sole or main purpose of securing a reduction in that liability, with no other material economic purpose, then the step shall be ignored for tax purposes). This seems to me to give rather too much discretion to the tax authorities to decide that your economic purposes are not material enough.

@28: well ok, fair point. I guess it just stings rather to imagine all those billions being claimed so righteously to the cause of the state, when really they could get the same cash just by cutting down a little on torture and persecution equipment. Is it so unreasonable to say “we’ll talk about more money for schools and hospitals just as soon as you put a few of those guns down”?

Remember two years ago the City boss who said he was paying less tax than his cleaner?

If a system that lets you do that is for you “liberal”, then go ahead, john b. But by the same token then you’ll view Gen. Pinochet’s Chile and Fujimori’s Peru as liberal regimes too. Meaning that the rich can do whatever the hell they please in the name of …wait for it…wealth creation (!)

So forget abstract talks of “fascism” and “liberalism”, coz when there’s a hole of £25bn per year dodged by corporations and super rich we have factual practical problems that require solutions.

Unless of course you want to accuse Vince Cable or Johann Hari of fascism. Or anybody (The Economist, notorious socialists) who objected to Murdoch’s corporation enjoying rubbish collection, policing and fire protection provided by he state without paying a penny in tax.

I know some people *love* hair splitting, but the fact is, the UK has long been seen as, basically, a tax haven by the rest of Europe.

Above all, in the light of zillions being ploughed by the taxpayer to rescue banks, the least that can be done now is to expect a tiny bit of a stricter regime from the banks in return. Because, at the end of the day, zillions to prop up big banks is hardly the essence of liberalism, or is it?

The report recommends the use of other anti-avoidance techniques – judicial intervention, and increased administrative scrutiny of people know to be using artificial avoidance schemes.

The latter is definitely going on at present. HMRC are being very open about this as part of the Customer Relationship Manager programme. Anecdotally, I know of a large household-name company that is unwilling to cooperate to reduce its rating to ‘low risk’, and is reknowned for taking on every dodgy scheme going.

Andrew’s whole comment, IMO, is pretty much bang on. There have been several specific motive tests introduced in recent years that have/are likely to significantly reduce long-standing areas of tax avoidance (capital loss buying and the new income stream rules), but a GANTIR is pure overkill, considering the considerable success that HMRC has had in recent years both in the courts and as a consequence of the disclosure regime (which after a rocky start, now quite neatly captures most of the more aggressive ideas punted around in the marketplace in a real time basis).

What can’t be prevented, however, is people taking advantages of specific reliefs introduced by government. The farago about the 0% corporation tax band is well known, but slightly less well known (and of a significantly greater cost in the long run, I suspect) are the fun and games that resulted from seeding relief[1].

[1] Broadly speaking, HMRC in the 2005(?) Finance Act introduced an exemption from SDLT for a property investor transferring a property into a unit trust. This was withdrawn a year later, but not before everybody who owned large Central London offices had transferred their properties into Jersey Unit Trusts free of SDLT. Future sales of units from these are free of SDLT…

“Remember two years ago the City boss who said he was paying less tax than his cleaner?”

No. I do remember a private equity guy saying that Gordon Brown’s tax system meant that he was paying a lower marginal tax rate than his cleaner. A higher average rate to be sure, and vastly more in actual money, but a lower marginal rate.

Is that the story you mean?

“coz when there’s a hole of £25bn per year dodged by corporations and super rich”

But as we’ve pointed out ad nauseam, there is no such £25 billion “dodge”. Murphy’s calculations are rubbish.

I was responsible for drafting the GAntiPs put down by Michael Meacher and John Pugh

For those who argue that this creates uncertainty my response is that that is complete nonsense

First, and as an accountant can I state this with absolute certainty, when someone is tax avoiding is the form suggested they know it. Which means that if there was a GAntiP they’d know not to do it. That is certainty

Second, as the PAYE targeted anti-avoidance rule of December 2004 has shown – this works and kills scheme promotion

Third – the courts are still there to decide if HMRC got it right – which is exactly what happens now for the uninitiated

Fourth – I also promote clearance arrangements – i.e. prior clearance of tax planning with HMRC – for which the tax payer would pay. That is certainty of a form we do not have now. That means the GAntiP would only target the reckless

That’s fair, robust, revenue raising and appropriate

So let’s leave all the libertarian nonsense aside – where it belongs – and get on with creating a fairer, simpler more effective tax system – which is what this is about

Richard Murphy

http://www.taxresearch.org.uk/blog

No, they are not. What you are saying is rubbish.

The “private equity guy” was Nicholas Ferguson, the founder of SVG Capital and one of the leading players in the industry, who said the tax breaks meant that billionaire partners “paid less tax than a cleaning lady” and “that can’t be right”.

That’s the story I mean, and if you think that’s “liberal” and “fair”, which you obviously do, then it’s probably because you’ve never had a poorly paid job and paid a full whack in tax, while discovering, like the UK did in 2007, that the 54 billionaires in Britain only paid 0.1% of their income in tax.

This and other scams such as offshore investments mean that many of Britain’s wealthiest people pay little or no tax. Treasury figures show that, for the year 2004-5, only 65 people had filed returns declaring a taxable income of £10 million or more.

The Sunday Times Rich List, however, shows that 350 British-based people have at least £200 million wealth, making them likely to ‘earn’ at least £10 million through dividends, interest or rent. But 85% of these super-rich paid no tax.

Sorry #35 was in reply to #33.

@31:

No, I don’t view Pinochet’s or Fujumori’s regimes as ‘liberal’, because they pulled out your fingernails with pliers if they didn’t like you. That’s the opposite of my point, about how laws should be based on clear indications of ‘you can’t do this’, and if you do anything which isn’t explicitly banned then you shouldn’t be punished.

The Murdoch/tax thing is a popular meme, but it’s not really true: News International didn’t pay any UK tax for years, because the profits from the newspapers were offset by the enormous losses in rolling out BSkyB. Now that BSkyB is both profitable and separately owned, the group pays fairly standard levels of UK corporation tax.

So let’s leave all the libertarian nonsense aside – where it belongs – and get on with creating a fairer, simpler more effective tax system – which is what this is about

Yup.

The other thing that makes me laugh about lower and middle class conservatives and libertarians is how they all seem to labour under the misapprehension that they’ll be let into the rich club if they just play their cards right and work hard.

Guys, you will never be one of them no matter how many gilded arsecracks you lick.

Now that BSkyB is both profitable and separately owned, the group pays fairly standard levels of UK corporation tax.

Considerably higher, actually.

(Full disclosure: I audited their tax workings for a couple of years so am limited in saying much further.)

The “private equity guy” was Nicholas Ferguson, the founder of SVG Capital and one of the leading players in the industry, who said the tax breaks meant that billionaire partners “paid less tax than a cleaning lady” and “that can’t be right”.

By which he meant that, as a result of Gordon Brown’s 10% rate on capital gains (taking into account taper relief of course) private equity bosses – who rely on returns from capital rather than salary for their money – will be paying an effective lower marginal tax rate than a cleaning lady, who will start paying tax at 22%

However, Tim W is right – the cleaning lady will certainly pay much (much much) less absolute tax. She will also probably pay less average tax, as the majority of her earnings are likely to fall within the personal allowance.

So he’s only paying ‘less tax’ than a cleaner in one, very restrictive sense.

@34:
As an accountant, you ought to know that stating *anything* with absolute certainty is daft.

@35:
On the PE thing, Ferguson’s comment referred to the fact that tax was paid at 10% on the sort-of-commission, sort-of-investment return that PE bosses get above their salaries (which are taxed at the normal 40% + NI). So Tim’s not quite right, but nonetheless the PE guys are paying hundreds of thousands of pounds a year in income tax and CGT.

The Rich List point is completely separate: the people there don’t pay (much) UK income tax because they aren’t British and don’t earn their money in the UK, so they only have to pay tax on the money they earn or transfer to the UK to spend. I accept there’s a fairness argument that we should tax them as much as a billionaire Brit who lives here, but if we did that then they’d bugger off home or to Monaco.

Maybe we’d be a better place without them, but it certainly wouldn’t increase government tax revenues…

I accept there’s a fairness argument that we should tax them as much as a billionaire Brit who lives here, but if we did that then they’d bugger off home or to Monaco.

But why not tell them to bugger off if they don’t pay their taxes? If they don’t like the country enough to pay their taxes then they can and should leave. I don’t see what the flaffing about is for.

why not tell them to bugger off if they don’t pay their taxes? If they don’t like the country enough to pay their taxes then they can and should leave.

Because you’re talking about money that isn’t being earned in this country, and on which they may very well already be paying tax.

#37
What you’re saying doesn’t add up.

News International didnt pay any UK tax for 11 years, to be accurate. In 1999 they they accumulated pre-tax profits of nearly £1.4bn, just to give you an example (other accounts spoke of £2.8bn profits) and still paid buggerall.

Reason? About 60 News Corp subsidiaries are incorporated in tax havens such as the Cayman Islands, Bermuda and the British Virgin Islands. UK-owned tax havens, in fact, another aberration that the government seems to have little intention to sort out…

Murdoch is notorious for performing one relocation after the other (a little like ‘home flipping’ for our MPs) in order to avoid tax: shifting funds from Bermuda to Manhattan, from Australia to Bejing etc…That’s why “the Murdoch thing was a popular meme” because it was a scandal and it was still totally legal at the same time – due to the UK’s fucked up/lax tax system and tax havens.

Sunny> OTOH, if it comes from economic activity that has nothing to do with the United Kingdom, what right does the British government have to tax it? There’s a fairness argument, definitely, but this is a stronger argument than many occasionally recognise?

It’s the root issue at stake, for example, in the fact that most UK headquartered Plcs actually pay very little corporation tax.

“No, they are not. What you are saying is rubbish.

The “private equity guy” was Nicholas Ferguson, the founder of SVG Capital and one of the leading players in the industry, who said the tax breaks meant that billionaire partners “paid less tax than a cleaning lady” and “that can’t be right”.!

Ah, yes, it is the same story. And you’re making something of a mistake in taking the word of The Guardian on a tax story.

Think through it for a moment. A cleaner earns, what, minimum or a bit above in London? £12,…. £13,000 a year? As we’ve worked out here before they’ll pay somewhere between £1,500 and £2,000 a year in tax and NI on that.

Tax bill, say, £2,000, just for ease of calculation. Marginal tax and NI rate of 30 ish (again, just for ease of calculation) percent.

We can’t use consumption taxes in this (VAT and excise) because of course the rich bloke spending his money pays the same taxes.

OK; so, our private equity bod. He’ll be earning, as salary, some decent amount. £100 k? £200 k? On which he pays full whack UK tax at 40 %. (minus allowances etc) but something like £60 grand. So, is he paying less tax than his cleaner? No, he simply ain’t. He’s apying about 30 times more. At a higher rate.

However, the majority of his incom will be from hte carry interest on the deals he’s done. These pay capital gains tax under the taper relief (now abolished I think?) system. That rate is 10%. So, when he cashes in after a deal, takes out his £2 million profit, he pays £200,000 in tax. Is this “less tax” than his cleaner? No, it isn’t. It’s 100 times as much.

However, it is a lower marginal rate (10%) than his cleaner (30%).

You really shouldn’t depend upon The Guardian, even the business pages, for explaining these quite simple things about tax. They always get them wrong.

Private equity bosses do not pay less tax than their cleaners: although they may well face a lower marginal rate. That last being a function of the way we tax income and capital gains differently.

“like the UK did in 2007, that the 54 billionaires in Britain only paid 0.1% of their income in tax.”

Another sad msunderstanding. The finding was that they paid 0.1% of their wealth in tax in that year.

“other scams such as offshore investments”

Eh? I own a house in Portugal. That is an offshore investment. Is that a scam or simply me investing my money as I wish?

“350 British-based people”

That’s all about the non-domicile rule: might be worth you boning up on it.

“So let’s leave all the libertarian nonsense aside – where it belongs – and get on with creating a fairer, simpler more effective tax system”

What libertarian nonsense? You mean like not taxing the working poor by raising the personal allowance? Reducing corporate allowances and at the same time lowering the corporate tax rate? Those nonsenses which would create a fairer and simpler and yes, more effective tax system?

Or do you have really crazed ideas in mind? Like copying the Nordics and noting that as capital is more mobile than either labour or consumption we should tax it more lightly? That sort of “libertarian” nonsense?

News International didnt pay any UK tax for 11 years, to be accurate. In 1999 they they accumulated pre-tax profits of nearly £1.4bn, just to give you an example (other accounts spoke of £2.8bn profits) and still paid buggerall.

Um, are you perhaps confusing News Corporation, the then Australian (now US) headquartered corpration with the UK arm, News International, which has significantly less pre-tax profits…?

Because you’re talking about money that isn’t being earned in this country

This is the thing. Sometimes it blatantly is. Tax advisers confirm that for years the super-rich were able to buy properties in Britain and escape paying stamp duty by holding them in offshore trusts. Shifting assets to non-dom spouses is another method of minimising tax obligations, as deployed by Formula One chief Bernie Ecclestone when he transferred shares to wife Slavica or Philip Green with his wife in Monaco. Financiers working in London can even escape UK income tax by arranging payment from a subsidiary based in another jurisdiction with no questions asked. Not surprising since the number of revenue officials has been significantly reduced in recent years.

But I guess us, the little people, should just keep our head down, right?

“Philip Green with his wife in Monaco.”

You’re getting confused again. Lady Green is “non-resident”. This has nothing at all to do with non-doms.

She does not live in the UK. Therefore she does not pay tax in the UK. The End*.

It’s all fine to get riled up about the way that the rich aren’t paying enough tax. But it would help if you actually knew the ins and outs of it all. Not just regurgitate whatever misunderstandings that Polly has had over the years.

*(OK, it can be more complex than that but here this is the case).

#49 Richard J is saying that the Economist and the BBC were wrong over Rupert Murdoch’s tax affairs in the UK. He is right.

It pays tax now, didn’t then. Simples.

#51. Dont pretend to be thicker than you are.
Billionaire Green acquired a company using his wife’s name. Precisely cos she is a non resident. That way the Green family have saved close to £500m in tax.

When Mr Green paid his family £1.2bn in October 2005, he financed it by taking out a loan. Although this is a common form of financial engineering in privately owned companies, it had the benefit of cutting Arcadia’s corporation tax bill, as the interest charges on the loan could be offset against profits. In this way, wealth was simply being redistributed from taxpayers to Mr Green’s family.

—
But it’s interesting to see such a fine display of little people unwittingly acting as guard dogs of the super mega rich online. Rest now, soldier, rest!

However, it is a lower marginal rate (10%) than his cleaner (30%).

Keep up Worstall – it was always the percentage being referred to. No one was actually suggesting the absolute amounts were being discussed.

Sunny> OTOH, if it comes from economic activity that has nothing to do with the United Kingdom, what right does the British government have to tax it?

That is a separate issue. Let’s stick to people who evade British taxes for economic activity in this country.

@52, and as I said above, the reason NI didn’t pay tax for 11 years in the UK had sod-all to do with its use of international trusts (if you have a UK-based workforce using UK-based assets to produce a product that’s sold to UK consumers in the UK, which is how the NI print media business worked pre-Internet, there’s *very* little you can do with international trusts to dodge tax. They only work if you’re doing inter-group transfers, and hence can bill foreign customers in low-tax places), and a lot to do with the enormous losses they’d previously run up on BSkyB.

You understand the principle, that if you make an enormous loss, you’re allowed to offset that against tax next time you make a profit, right?

@55 there are two different percentages, though. One is “what proportion of my income is paid in tax”, one is “how much of the next pound I earn on top of my current income is paid in tax”. Most of the PE guys will be paying more than the cleaner on the first measure, even if many are paying less than her on the second.

Finally… the point is not ‘being a guardian of the megarich’, it’s about setting rules based on utility maximisation rather than petulance. If we do better by having 350 sleazy oligarchs here than in Monaco, then it’s right that we should have them here; if we don’t, then we should get rid of them *because we’re agreed the substantial extra money they generate isn’t worth the unpleasantness and unfairness*, rather than pretending they don’t generate substantial extra money.

Sunny:

“Keep up Worstall – it was always the percentage being referred to. No one was actually suggesting the absolute amounts were being discussed.”

Oh, really? I said that:

“No. I do remember a private equity guy saying that Gordon Brown’s tax system meant that he was paying a lower marginal tax rate than his cleaner. A higher average rate to be sure, and vastly more in actual money, but a lower marginal rate.

Is that the story you mean?”

And I was told by Claude:

“No, they are not. What you are saying is rubbish.

The “private equity guy” was Nicholas Ferguson, the founder of SVG Capital and one of the leading players in the industry, who said the tax breaks meant that billionaire partners “paid less tax than a cleaning lady” and “that can’t be right”.”

So it certainly seems that Claude thought it was the “actual amount” being discussed, doesn’t it?

#56
They only work if you’re doing inter-group transfers

Congratulations, john b, you just got it!
I take it you understand what that means.

PS: The BskyB losses came much later.

Worstall,
do us a favour, don’t make me say stuff I didn’t say and don’t mix replies to certain comments with others, which you are conveniently doing.

When I said “what you’re saying is rubbish” I was CLEARLY referring to your assertion that “Murphy’s calculations are rubbish” @33.

Funnily enough I was at a conference with the Oxford University Centre for Business Taxation the other day and they use tax gap measures far cruder than mine

So why are they also wrong Tim?

@59
yes, I get it; unfortunately you don’t. There isn’t *scope* to do that kind of thing to any significant degree when you have a business whose assets, liabilities, costs and revenues all arise in the same country.

And Sky launched in 1984. The expensive multichannel roll-out with national marketing began in 1989, and the merger with BSB came the year after. BSkyB made its first operating profit in about 2000 and its first net profit before tax in 2003.

“Funnily enough I was at a conference with the Oxford University Centre for Business Taxation the other day and they use tax gap measures far cruder than mine

So why are they also wrong Tim?”

Why should I have any idea at all given that I’ve not looked at them?

Further, simple because someone else is also wrong does not make you right.

John B,
that’s exactly what happened. intra-group financial transactions. Moving capital and loan stock around to generate profit and losses accordingly, key roles given to low-tax countries, including Bermuda and the Cayman Islands. This is a fact that was never refuted by any of Murdoch’s spokespeople. John B obviously does. Their response throughout what simply that all those byzantine moves were all legal, which is true.

The BSkyB costs in the 90s do not explain the full extent of Murdoch’s tax dodging, not even a portion.

Aaaaaaaaaaagh. Even the Grauniad piece at the time admitted that the majority of the difference between tax and [reported profit * standard tax rate] arose from the UK’s capital allowances.

The suggestion that you can ‘bounce profits about the place’ until your tax liability for them disappears simply isn’t true if you’re a plc listed on a major exchange – which News Corporation is.

John B

Prove it!

I do not accept that hypothesis

Richard

@4 what argument?. Michael Meacher’s idea seems to be that, instead of the government framing sensible tax laws, people should pay what the politicians thought they were going to get. If you’ve got a bike, you should be stopped from using it, because you’re just saving on petrol and car tax. Perhaps he’d have people obliged to drink and smoke, so that they don’t “avoid” tax.

This is an utter dog of an idea. And it’s a licence for the authorities to make the rules up as they go along, which makes it stink all the more.

If you can ‘bounce profits about the place’ until your tax liability for them disappears, if you are a plc listed on a major exchange, why do any plcs pay any taxes on profits?

“She does not live in the UK. Therefore she does not pay tax in the UK”. (d’oh)

“The suggestion that you can ‘bounce profits about the place’ until your tax liability for them disappears simply isn’t true if you’re a plc listed on a major exchange – which News Corporation is.” (your opinion, mate, I maintain News Corp and News Int never disputed the fact that Murdoch employed some very good and creative accountants)

It’s like saying: “That referee was corrupt”, and in reply they tell you “No, he wasn’t . A referee is supposed to be impartial.”. And you ‘re like…”exactly, but he wasn’t!” and in turn “but referees don’t take side”…ad nauseam.

Some people really have a funny way of arguing.

I’m a regular on here but normally under a different name and with a blog that I link to. I’m posting anonymously on this subject for a number of reasons which I wont be going into.

First, as has been mentioned above there is case law, but not statute law, that effectively makes the more extreme areas of tax avoidance illeagle. This is the House of Lords ruling in WT Ramsey v Commisioner of Inland Revenue in 1981. What this ruling said is that when a transaction or series of transactions is set up WITH NO COMMERCIAL PURPOSE but only to avoid tax then we can look through the legal form of the transaction and consider the economic substance, thus it essentially out laws the more offensive schemes involving circular transactions.

What it does not do though is out law tax avoidance all together, all other cases have to be looked at on a case by case basis as to whether they fall foul of any other statute or case law.

Ramsey is normally only used by HMRC as an argument in court because it is in effect the nuclear option. While it is highly effective they only need to lose once using it, it only takes one House of Lords or ECJ ruling that effectively over turns the Lords decision in Ransey and that’s it, good night Vienna, the tax authorities no longer have any kind of anti avoidance provision and you might as well just open the flood gates to the most offensive schemes.

So why not enact a general statutory anti avoidance provision? Lets move away from the liberty stuff mentioned above and consider cold hard tactics that HMRC may wish to use. It boils down to such law being once again a nuclear option. The large accountancy and law firms know that if they REALLY take the piss then that is exactly what the government would propose to parliament, and that could really fuck over their tax advice services. The government wont do it though for the same reason that they are reluctant to argue Ramsey. It only needs to be found to be at odds with other legislation once, eg incompatable with the Humand Rights Act and once again, that’s it. It can never be used again with out unpicking a massive amount of law.

And that is why we wont be outlawing tax avoidance en mass any time soon.

Fair points, but how do you see HMRC’s new-ish litigation strategy interacting with this? I’m personally aware (albeit second hand) that several potentially awkward issues have been avoided through horse-trading about the tax at stake, so I’d be interested in your thoughts.

RM,

Funnily enough I was at a conference with the Oxford University Centre for Business Taxation the other day and they use tax gap measures far cruder than mine

I find that hard to believe.

Like so many of your other comments.