According to the FT, a Treasury spokesman said in response to Nick Clegg's suggestion of a tycoon tax this weekend:
“There are people out there making use of various reliefs and loopholes who don't pay much tax at all."
That is undoubtedly true. But they added:
"There is a commitment across government to close those loopholes.”
That, I doubt.
First, Graham Aaranson's general anti-avoidance rule is no such thing. As he says:
I have concluded that introducing a broad spectrum general anti-avoidance rule would not be beneficial for the UK tax system. This would carry a real risk of undermining the ability of business and individuals to carry out sensible and responsible tax planning. Such tax planning is an entirely appropriate response to the complexities of a tax system such as the UK's.
However, introducing a moderate rule which does not apply to responsible tax planning, and is instead targeted at abusive arrangements, would be beneficial for the UK tax system.
2) You have to get rid of discriminatory domicile rules.
3) You have to stop people shifting significant amounts of income and gains to their partners.
4) You have to make people personally taxable on the income of their personal service companies.
5) You have to make sure that offshore is open to view — or people will hide their income there. But this government is planning to preserve offshore banking secrecy for good through its deal with Switzerland.
6) You have to stop people diverting their income into trusts for family members, and treat those trusts as the settlors.
7) You've got to have a real general anti-avoidance principle.
8) You need an effective corporation tax on major multinational corporations and the curtrent government is destroying that tax.
9) We need real taxes on wealth.
10) Local authority tax has to be transformed.
and of course:
11) Benefits have top be fair, sometimes universal, and have effort expended on them to make sure they are claimed.
I don't believe the Treasury is committed to those things. In that case the loopholes will remain. And what they're saying is not true.
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Your suggestions are nothing more than a wish list of sticky plaster reforms that will do more harm than good to the tax system and taxation in general.
Our tax legislation is in a total mess, largely due to successive governments tinkering at the periphery of tax law. Our tax law is too complicated, confused, unwieldy and open to abuse by both taxpayer and HMRC alike. Just compare the size of the Yellow Books from 2000 to today.
If you genuinely seek reformation of the tax system so that it is both fair and certain – and meets the needs of the country – you should rather be campaigning for a full review of the tax system by a Royal Commission to ascertain whether it meets the modern needs of all UK stakeholders. This review should have the power to recommend a complete overhaul of the UK tax system and to recommend appropriate legislation.
And I would argue that my list is what a Royal Commission would suggest
So no need for a commission then – you have done it all for us.
The question remains whether you have the necessary creditability to determine our tax future given who supports your work.
Sorry, a Royal Commission is a far better proposition where every stakeholder has a voice.
I’m not against a Commission – I just suggest that they’d find as I do…
Incidentally the Chartered Institute of Taxtation oppose Aaranson’s GAAR mainly because of their concern that it will raise false expectations.
your number 3 is interesting…………..people wouldnt be able to go into partnership with their spouse and allocate income to them……….
number 4 is equally as interesting. If i am a geuine sole trader and I trade via a limited company you would basically be forcing me to remove all the cash from the company rather than keep it in there for potential reinvestment etc – or else you need to create a load of new tax rules which will say I will be taxed on all the income personally unless x,y,z is done with the money (reinvestment, purchase of new assets) etc etc. Not exactly simplifying tax law is it.
For a tax practitioner you’re remarkably ill informed
a) You can’t just allocate income already to spouses – don’t you know that?
b) Did you never know of close company apportionment?
Try reading this http://www.taxresearch.org.uk/Documents/TRLLPSmallBusinessTax8-08.pdf
“a) You can’t just allocate income already to spouses — don’t you know that?”
So what will be the point of no.3 in your manifesto above?
As for close company apportionment, given that it features in an obscure report that nobody ever read a few years ago, I think it is reasonable to assume that someone will not have heard of it. And the apportionment you refer to in the report will be virtually impossible to determine, enforce and police. And you must know that.
Point 3 means we need rules for doing so – and I propose viable ones that do that
And close company apportionment is part of UK tax history – and not that long ago. So respectfully your comment makes not sense to me
On the issue of aligning capital gains tax rates to income tax rates, there has to be a fundamental problem. One may be alignigning the tax rates but one is not aligning the risk element.
Any investment that might be subject to CGT is, obviously, also liable to a possible capital loss but one cannot make a loss through income unless one assumes that an employer will charge you for working for them.
Changing the CGT tax rate has obvious implications on the assessment of risk in an investment and make investment less attractive. Any gain would be less rewarding but there is no corresponding compensatory reduction of any possible loss.
We are told incessantly that SMEs are being hindered by lack of finance for investment and expansion. People blame the banks for not lending but bank lending is not the only source of finance. Venture capital is another. Does it make sense to make venture capital investment less attractive?