The Trump campaign team issued a statement yesterday saying that:
Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.
Now that's an interesting idea. The statement was issued in response to a suggestion that Trump may not have paid Federal Taxes for 18 years. It would seem that this did not require significant skill: it may have only required making thumping great losses for tax purposes, but let's ignore that. Let's instead look at that issue of fiduciary responsibility.
And let's generalise this: the term fiduciary duty implies an imposed obligation, not a matter of choice and so if it applies to Trump it must apply to everyone.
One on line US dictionary defines fiduciary duty as:
A fiduciary duty is the highest standard of care. The person who has a fiduciary duty is called the fiduciary, and the person to whom he owes the duty, is typically referred to as the principal or the beneficiary. If an individual breaches the fiduciary duties, he or she would need to account for the ill-gotten profit. His or her beneficiaries are entitled to damages, even if they suffered no harm.
That's a pretty big claim to make then. It says Trump's wife and children could sue him if he did not minimise his tax. How might that be? On what contractual or other basis might they claim the loss? I'd be interested to know under what law he has a duty to maximise his the resources available to his wife and children that gives them a legal right to claim against him.
And again, on what legal basis might his employees claim? If they've been paid their full contractual obligations how can they then claim a part of his tax savings? Can anyone suggest how that works? I am sure quite a lot of people would be keen to know.
As for his business (note. it's his business: owned by him); why and how might that sue him if he has failed to minimise his tax? It would be him suing himself. The lawyers might enjoy it, but there really is no case.
And there's good reason for all three observations. There is no fiduciary obligation to minimise taxes in the simplistic way suggested here, and that's most especially true in respect of your family, employees and own business.
This claim is pure undiluted nonsense.
And this man may be President of the USA.
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Trump clearly exposes the belief of many wealthy people that they have no obligation to pay democratically agreed taxes. In the first presidential debate he said that not paying taxes “shows I am smart” – in other words paying taxes is just for schmucks.
This is a distorted set of values that has to change. Just as drink driving was once considered as something everyone did, and that the only crime was getting caught, we now need to make failure to pay democratic taxes as socially unacceptable. Tax evasion is not a victimless crime. It undermines the social and economic system which all profitable businesses derive their profits from, enables corruption, and most of all it disadvantages some of the poorest in society.
The fundamental step to making tax evasion both socially and politically unacceptable is of course to introduce transparency in all company reporting and personal wealth management. Only when we can name and shame those who are cheating the system will we change the culture that just sees evading taxes as the “smart” thing to do.
Agreed
And we are getting there
Are you suggesting that Trump as EVADED taxes?
No
I never even hinted it
Any good to you?
Lord Tomlin IRC vs Duke of Westminster circa 80 years ago.
Every man is entitled if he can to order his affairs so that the tax attracted under the appropriate act is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”.
Slightly more seriously: Trump s manipulation of the IRS in 1995 ” inveigling” them into a) accepting a one trillion dollar tax loss that year and b) cajoling them into allowing that tax loss to go towards possible future earnings projected on estimates to have covered a circa eighteen years future dcf goes to Trump not being a complete fool and the IRS having to chsnge its rulrbook..
Corrrct if I m wrong but UK HMRC allow a max of three/four years tax loss carry over which discourages such antics…..
The Duke is dead – killed by the GAAR
And HMRC allow unlimited carry forward against the same source of income
Richard.
Wishful thinking indeed to say that the GAAR has usurped Duke of Westinster. Every man is still entitled within the law to organise his tax affairs to minimise his taxes. All GAAR does is refine that law.
There is no fiduciary duty to minimise taxes but it sensible to do so and there is certainly no moral duty to maximise taxes, as your choice of self employment in an LLP rather than employment in your own company demonstrates.
Try and do that after penalties in the suppliers of tax avoidance are introduced
You really are wrong here
But you also reveal by your last comment that you really do not understand what tax avoidance is. I cannot avoid tax by completely complying with the law in a way parliament intended
Oh dear Richard.
Parliament didn’t INTEND that you set up as an LIP they ALLOWED you to choose to do so just as they ALLOW Starbucks to buy coffee beans from connected companies.
You seem to have adopted a new rule for deciding what is and isn’t tax avoidance. I call it the BISS rule. Given two identical scenarios you are capable of defending one action whilst criticising the other as tax avoidance. When asked why you simply reply:
“Because I Say So”
Luckily for the rest of us, your BISS rule will never carry any legal weight.
Paul
Some of the most senior tax lawyers in the country reckoned I had got this right last week
I also helped write the GAAR advice
I happen to also be reflecting HMRC’s understanding
So let me simplify your rule and offer it back: you’re offering BS – and yes, that is bullshit in case you are in doubt
Try also understanding precisely what Starbucks did wrong too, because you’re also got that wrong
Richard
Thanks for the clarification. My accountants (Smith /Williams) were explicitly told by HMRC that the tax credit they had computed for me on my Liechtenstein Disclosure Facility could ONLY be offset against future tax liabilities either UK ( resident) or offshore for max THREE years. Arguments for a longer period were dismissed.
Do ” amnesties” like the LDF have their own rules for this? Thanks.
I did say conditions apply
And I was also talking about trading
You are not
Oh dear again.
You still don’t understand. The key phrase in the Westminster case is “under the appropriate statute”. GAAR has changed that statute but everyone is still perfectly entitled, provided they stay within the law, to arrange their tax affairs in order to minimise the tax due and you won’t find a lawyer or HMRC who would disagree with that.
And what was it Starbucks did “wrong” then as the extra amount they paid was entirely voluntary. One thing is certain, you won’t detail that.
No need to explain what BS is Richard, how could anyone read this blog and not be confronted with it every day?
The ‘oh dear’ is all yours
I am right
And you are wasting my time
There is only one penalty for that
I understand that his ‘high skill set’ concerns how often he has failed in business and how over-leveraged he is at the moment.
If you were that much in hock to the banks, your views on being taxed wouldn’t be any thing other would they?
And as house prices rise, wages stagnate or drop, debt goes up, this feeling about not wanting or having to pay taxes will bloom throughout society in general.
Thanks Prof. Murphy.