I see I'm not the only person to have noticed this: Nigel Stanley at the TUC has done so as well.
As Nigel says:
Almost every MP has defended what they have done by saying it is within the rules. This is what every company or individual accused of tax avoidance does. Remember tax avoidance is getting round tax law, while tax evasion is breaking tax law.
This is all part of a wider cultural change caused by the great growth of inequality under the Conservatives and Labour’s failure to do much about it, despite some admirable if limited moves on poverty.
I note some disagree though: many comments on my Guardian blog say things like:
The big difference is that people who use tax havens and practise tax avoidance are preserving their own money, whereas the MPs are taking someone else's money. I would say that the two 'offences' are not morally equivalent and that of the MPs is much more serious.
I readily admit I don't get that argument at all. Anyone who avoids paying tax by getting round rules reduces the sum available to the public purse. I can see no difference at all in the offences: both plunder the public purse for private gain.
I quote David Cameron:
Politicians have done things that are unethical and wrong. I don't care if they were within the rules — they were wrong.
Precisely. Exactly the same (and I mean, exactly the same) can be said of tax avoidance.
Tax avoiders should also be writing out cheques. The moral argument is clear: it's equally clear people believe in it.
Now let's get rid of tax haven / secrecy jurisdiction abuse as well.
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Oh come on Richard. 🙄
Most of the hot air is about the alleged abuse of the second homes allowance. I am sure you understand the distinction between an allowance and an expense? It all makes for good headlines and papers sold, and gives Cameron a chance to upstage Brown (not bad for a Tory paper!), and of a mess that was of his own making. But the link with tax is in your mind only I’m afraid. Apart from perhaps to illustrate how the law can be used to benefit certain well placed groups of people.
Agreed. I’d be very interested in your views on the Hazel Blears issue. Apparently she has taken your advice to tax avoiders and has written out a cheque to the Her Majesty’s Revenue & Customs, giving up on her earlier argument that the “rules” allowed her to declare her property a second home for Parliamentary expense refund purposes but her principal private residence for capital gain tax purposes. I know that if I or any of my clients misrepresented anything to HMRC then the authorities would not be content simply with the back tax, but would at the very least be looking at interest and penalties, if not more serious sanctions. What I find utterly shocking, and assuming my understanding of the facts is correct, is that a scheme as devious as maintaining the property is a second home for one purpose but a first one for another, can even be contemplated by anyone in public life. If she obtained “professional” advice on this issue then the “professional” who gave it should be named and be obliged, by whatever “professional” association he or she belongs to, if any, to cease giving such advice in future. What is even worse is that it appears that Ms Blears did not orginally pay tax on a windfall gain applied at the hardly draconian rate of 18%.
Alastair
Only a pedant or an accountant or a pedantic accountant with no political antennae could not see that the two are the same
Richard
Colin
I agree: although I accept it was probably ‘within the rules’ – remember the three years rule for CGT allows you not to live in a property and claim CGT relief on it
And I assure you – accountants used to commonly advise one property as main residence for CGT and another for mortgage tax relief under income tax – and got away with it without any conscience at all – becasue it was ‘within the rules’
What you’re showing is the absolute absence of integrity within most of the tax profession – which Alastair denies
They will carry on abusing, without doubt, until we stop them
Richard
It’s amazing how conscience & a profound sense of morality & shame suddenly grips an MP when his/her jiggery-pokery is exposed! Ah! BUT hang on…it is not a ‘born again’ experience these lofty people have! It is no ‘Damascus road’ experience of ‘seeing the light’ and repenting from their ill-gotten gains! No! it is an unhealthy realisation that they run a serious risk of losing their parliamentary seats which offers them all a guaranteed quality of life that will far excede anything that the average Joe Blogg will aspire to!
I heard today the Prime Minister commending to the House a reformation of the allowances system, but I didn’t hear him say the Leader of the House would be calling in the Police! He most certainly should have done! That’s what they are there for. Instead he proposes wasting taxpayer money by bringing in team ofindependent, highly-paid acountants to sort them out!
A comment on AccountingWEB suggests that HMRC have been complicit on this issue. A Revenue employee who suggested that MPs should be targeted in the past was ‘shot down’ and warned that any further moves on that issue would result in disciplinary action.
You’re not the only person to see the connection Richard – or the first 😉
I raised the question on my TaxBuzz blog back in February 2008: Is it one rule for MPs and another rule for the rest of us?
I was concerned about the apparent double standards that applied when it comes to tax planning. I noted that, in the context of the then brewing concern over MPs and their expenses:
There is rarely any suggestion that anyone has broken the law. No. They have simply looked to secure the maximum reward for their efforts within the strict wording of the rules.
Those involved have adopted a literal and precise approach to interpreting the rules. Not a purposive approach.
I was drawing an analogy with attitudes to tax rules where there is increased debate as to the distinction between acceptable and abusive tax avoidance (both approaches being legal and within the rules).
http://taxadvicenetwork.blogspot.com/2008/02/is-it-one-rule-for-mps-and-another-rule.html
Mark
We are as one on this issue!
Richard
Colin, just to be clear, if there are no exemptions for capital gains on house sales by MPs, then not paying the tax due is evasion rather than avoidance. Richard, just to be clear that is not pedantic, just a fact.
Richard, if you are reading between the right lines you will have spotted that the public outrage is about one set of rules for us, and another set for them.
Alastair
Of course you’re right
But I suspect Blears was not evading. I expect she was using the 3 year rule too imaginatively
That’s avoidance
But like all avodiance – utterly unacceptable when exposed in the harsh light of day
Richard
This sort of avoidance is not rocket science. All you need is to know the rules regarding PPR elections, the three year rule and the special exemption for let property. It helps if the taxpayer has some idea about what their plans are for the next few years and any reasonably competent accountant should be capable of this kind of avoidance. That is not to say that it is appropriate behaviour just that it is too damn easy!
@John Newth
There is no such thing as a three year rule! A residence is where you are regarded as having your home where your friends and and family expect to find you. Taxation of MPs is subject their rules. S199 ICTA1988 applies (or did). Wholly, exclusively and necessarily does not apply! despite their declaration which is a Revenue requirement. The bottom line is that if you want an honest MP dont vote for a politician.
@Richard Murphy
They are only doing what the whizz kids in the financial markets were doing! devise a scam and if you can get away with it; my profit your liability! My bonus in mega bucks, your dig out in billions courtesy of Brown et al!
@alastair
Spot on Alastair, as an ex Inspector of Taxes, I opine that unlike employment expenses rules which MPs have excluded themselves they are not exempt from CG rules. PPR rules are quite specific although not fully deployed as in “not applied”. If you want full compliance I will scrutinize their claims – that should activate a few sphinters
“They are only doing what the whizz kids in the financial markets were doing! devise a scam and if you can get away with it; my profit your liability! My bonus in mega bucks, your dig out in billions courtesy of Brown et al!”
Exactly. The City tax avoiders and MPs may are operating within the strict letter of the law, but as has been pointed out, it’s not ethical.
Now, a thought occurs to me. Perhaps I’m being too cynical, but is it a coincidence that it is the Telegraph, one of the keenest defenders of the City and it’s culture of bonuses, tax avoidance etc, that has come out with these revelations?
After all, the Parliamentary Select Committee’s report on the banking crisis came out this morning, and laid into the banks with some ferocity. What better way to deflect criticism from the City than to destroy the reputation of Parliament, and hence any report, however well researched, that it produces?
Isn’t the real difference that Labour has always tried to claim the moral highground, whereas bankers have always been in it for themselves?
As Harold Wilson famously said, “the Labour party is a moral crusade or its nothing”. Well, with bullies in his office and pigs at the trough all over his benches, its hard for Gordon Brown to claim any sort of moral high ground.
The simple fact is that this is probably the last Labour Government ever. It’s probably 50/50 as to whether they finish second or third at the next election. The Tories will have a clear run, and its obvious that if Britain is to get its finances in order, it needs a booming City again. That is the future, its the only game in town that the politicians can recognise.
Paul
You may be right, for some “its the only game in town that the politicians can recognise.”
But then it’s all about fiddling and it’s clear some can only do this
Now get real: the City does not add value
Richard
Paul, you’re depressing me; if you’re correct about the next election, we’ll have a party that will want everybody to forget what it’s friends in the City did and will seek to blame the terrible state of the country’s finances on the public sector, and Labour.
We need a booming City again! Isn’t it the City and its’ culture of reckless bonus driven short term financial jiggery-pokery that’s got us into this mess? If we can’t find some other way of sustaining ourselves in this country we might as well all give up now.
Time and time again the protestation is that the Fees Office said that your’ claim is alright. That is not right! There should be independent arbritration of the absolute decision to allow an expense or not. An independent committee from the populace should be assembled to adjudicate on line to govern these claims. The Opposition offers to publish their claims on the internet; let public scrutiny decide!
I think that what we really need is a society that isn’t fixated with money or the idea of growth.
I also think, realistically, the Tories will get in with huge debts to pay off and will decide the only game in town will be to have one last boom from the City. Although I don’t share most of the views of regular posters on this site, from “your” perspective, the upshot could well be the end of the labour party but a LibDem party as the official opposition, which in the long run might be better than the current position.
But I wouldn’t blame the City for all of this. Politicians of all parties want to sell an agenda of “rising prosperity” which in Britain is interpreted as everyone having a right, if not a need, to own their own home. And that can only happen with affordable mortgages…which invariably leads to a build up of debt in society. Sure, the City facilitated this, but in the end, it was driven by people wanting to live beyond their means and politicians who were happy to encourage them.
What we need to do is move to a society based on living within our means – both our financial, environmental and, although it is almost embarrassing to say it, our spiritual needs. Nobody needs a new phone every month, or to have this season’s “must have” item of clothing. But it will be a brave politician who can articulate that.
Beckets hanging baskets £600 are not wholly necessary for her to do her job. Did she declare this as taxable income; if not will she be investigated ?
Labour is going to be trounced in the June elections. Somehow I can’t see this corrupt Parliament surviving much longer. The ‘peasants’ are revolting at a revolting Government. Britain might be in for its first really radical revolution. The Tories are not coming out with shining halos & the Liberals are tarnished in this allowances hanky panky, so don’t bet on them getting in! What frightens me is that the anti-labour vote could end up being distributed between a mushroom of new ‘ethical’, ‘moral crusading’, ‘clean-up-the-system’ parties that result in Labour getting back in again!
Perhaps the whole electoral system will have to be overhauled… we might get a system of proportional representation coming out of all this. I have been against that up until now, but I am beginning to think that it might not be a bad thing to crack the mould of a two party system thzt does not properly represent the people & the best interests of the UK.