I was on LBC with Nick Ferrari this morning. He made the point that he was quite sure Lewis Hamilton had not designed whatever arrangements he has to save tax. And he is right. Lewis Hamilton did not do that. An accountant and a lawyer did that for him.
So who is to blame if mistakes were made?
And who is responsible if abuse occurred?
Lewis Hamilton may not have shown best judgement but he did not create this abuse. So let's blame those who did. The accountants and lawyers are responsible. And it is time they were called out for that.
I stress, Lewis Hamilton might have been wiser. But being badly advised is not a crime. Offering bad advice is what should be called out here. Which is why I want to focus on the lawyers, and most especially the accountants who underpin offshore abuse.
And I start with the Big Four - PWC, Deloitte, EY and KPMG - who make all this possible. They are most at fault in the world of offshore.
Now let's deal with that.
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Since they are all at it. The ICAEW are the right people to ask.
They monitor the education and supervise the regulation.
The problem is that they all will turn to the law and commonly blame the law for allowing it.
Then you have to turn to the Government.
They will blame other countries and competition for jobs.
So then, you have to turn to who?
I suggest this is the key problem, the people will have to vote with their wallets and bring in power those who
take r5esponsiblity to make absolute change, now.
I understand that Britain has more tax haven dependencies than any other jurisdiction in the world. This is not an accident. When the British wring their hands about the issue as a world-wide, international problem that can only to be solved by international agreement, this is disingenuous. Britain is a very serious part of the problem, and has provided no substantive evidence that it is, can be or wishes to be part of the solution.
The problem in Britain this approach reveals is endemic and systemic. Brexit, for example expresses a desire (conscious or not) to live in a world in which Britain can operate solely according to its own rules, exclusively for its own advantage. At the same time it wishes to be at the heart of world markets (in Forex, in insurance, etc., etc), establishing the rules and exercising the position of international arbiter of standards. In short Britain wants to have its cake and eat it; and it seems to think it can actually do this, and nobody will even notice.
I agree with you. The problem is that the Us and Europe are in collusion.
As for the rest, the problem is that very few pay any Tax (1% in India)
This is why I say that self interest drives the Tax Avoidance industry.
Customers can vote with their wallets by stopping to use those businesses that do not pay their way
in the countries they make the Profit in. Also kick the Politicians out, if no change in collecting fair taxes.
The standard response now is to distance oneself from the (incompetent/illegal/immoral) actions that have been exposed to the public.
It was the same with the bank directors – we did not know about LIBOR etc.. –
Or the BBC board- we did not know about Saville.
Or the entertainers – we left it to the accountants.
I thought each person signed their own tax return. The accountants etc are not agents but advisers. The taxpayer pays the penalty if found guilty.
The right wing in this country is immensely strong on personal responsibility until it comes to tax and financial chicanery.
By the same logic then, you might as well absolve most of the lawyers and accountants who have a fiduciary obligation to do the best they can by the their clients (within the law) and ask why our professionally conflicted politicians with vested offshore interests never seem to be capable of delivering laws to limit what the lawyers and accountants are allowed to do. They are all making immoral calls IMHO but not necesssirly illegal ones
Accountants have a legal and ethical duty to be honest
Nothing let’s them be dishonest for their clients – and that includes falsely representing the location of transactions and so profits subject to tax
Of course we can limit accountants and lawyers. But they have to stop abusing the law
the form they broadcast on the programme signed and stamped by IOM HMRC stated that his jet would be used 15% of the time for private use. Surely the fault here lies not with Hamilton or even his advisors but the IOM authorities?
Who filled in the form?
Richard – did you hear PM’s coverage last night on the tax avoidance papers.
If not it is well worth a listen – link here http://www.bbc.co.uk/programmes/b09cvwx3
I don’t normally like singling out individual broadcasts – in general it is better to look at the range of coverage – but this one was a shocker.
They had on a tax avoidance lawyer – James Quarmby- who was given a very easy ride by Mair and allowed to make a whole series of highly contested statements – that tax havens weren’t used primarily for tax avoidance, that the Tories had massively tighten up the regulations on avoidance, that the tax gap was less than £7 billion and at the lowest level in history – without any serious challenge from the presenter.
When were you you or Nick Shaxton last on PM?
I was on with Quarmby on Jeremy Vine at lunchtime who was condescending and rude
I suspect that was enough to show him in his true light to most listeners but why he gets air time for his crass observations is hard to work out
I have been on PM, but not for a long time
Radio 4 have not asked me over the Paradise Papers. I have been on air more in Ireland
The reason you are not on R4 etc more often Richard is because you unlike many of their contributors know what you are talking about.
He also doesnt live in the UK, so we arent really involved in his tax affairs any more.
We are when it comes to VAT
And no one said he is only avoiding UK VAT
He is avoiding EU VAT
Hi Richard. I’ve just watched Corbyn forcefully condemning tax avoidance and evasion here – https://www.facebook.com/Channel4News/videos/1470842406327031/
The story is that tax pays for hospitals etc. and unpaid tax is essentially theft from society. Now I’m still trying to get my head around the MMT story (and I appreciate that it is subject to sustained critique) but as I understand taxes do not pay for government services. Now, I understand that taxes are nonetheless essential in the management of the economy and as a political (and moral) tool, but I am concerned that Corbyn’s message fuels the tax and spend myth and, therefore, plays in to the Tories’ economy-as-household story and the argument that ‘labour can’t be trusted on the economy’. At the same time I can see the virtue in deploying the myth for political ends. I’d be interested in you take on the political strategy (assuming you have one). Thanks.
Might I recommend my book The Joy of Tax as an answer?
There are times when you need to separate one context from another. MMT has its place in the greater scheme of things. It need not be a constant obsession.
As I understand it, Hamilton was resident from 2007 to 2012 in Switzerland, and from 2012 in Monaco. If he want to buy an aircraft, why he should be paying VAT in the UK?
He should be paying VAT in the EU
The programme made that clear
It did not say just in the UK
This was the most revelatory piece of information from the programmes for me: when Apple was trying to find another home for its lucre, after the Irish dodge collapsed, it asked what was the state of opposition parties.
It certainly shattered their carefully spun lines about not being interested in tax avoidance
Don’t agree. Hamilton moved to Switzerland years ago, which cant have been by accident. There have been these kind of celebrity tax-dodging scandals before – everyone knows the score, so a rich celebrity with principles would insist to their advisors that their tax affairs followed the spirit as well as the letter of the law.
In fact, if they were really principled people, you could argue that they shouldn’t need ‘advisors’ at all, merely an accountant to submit their annual accounts to HMRC, just like any other self employed person, or sole proprietor of a limited company!
Hamilton lives in a bubble where the normality of Stevenage has long been forgotten
At a guess I suspect that Mr. Hamilton would be more concerned with his mechanics rather than his accountants. That way he stays alive.
But I hope he has a good lawyer now
Agreed. It’s hard to imagine Lewis Hamilton getting excited about his tax affairs when he drives very fast cars for a living. Maybe in an ideal world he should, but completely unrealistic, which makes the prospect of him gainsaying what his advisers tell him impossible to expect. The focus should be on those advisers.
We are all aware of this governments constantg attacks on the welfare state. Help the aged have never been bustier
helping elderly people who’s benefits have been cut. Not realising these problems will rarely get better. Whilst tax is voluntary ?? For the elite?? Even Mr ACameron our PM admitted he had an “ off shore account”
We must rid our country of the idea tax avoidance is cleaver!!!!
It’s straight forward theft by people who could easily afford to
Pay???
but Richard think of the coach makers and auto mnufacturers! Who will ever buy their flashy pieces of junk if there isn’t some structuring! Serenity now!!
[…] I don’t blame Lewis Hamilton (Tax Research UK) […]
This was no “accident”. Lewis Hamilton is a very intelligent person and would have done his “homework”. Like anyone else, he would have looked at an efficient way of buying an expensive item, like we all would and worked out the best way to purchase such an item, knowing at that point the pros and cons of it all. Yes he would have advice, like you would buying a house….
I have buying a house?
Really?
You think I pay someone (other than a conveyancer) to do that?
Wow: you live on another planet
I think you let off Hamilton too lightly, Richard.
Yes, clearly the system, and the tax/legal professionals who advise on the best way to navigate its unintended loopholes to reduce their clients’ tax liabilities, should bear the brunt of public ire.
But when has ‘I didn’t know anything about it, honest guv’ ever been an adequate excuse to completely mitigate ones culpability in an abuse, whether moral or legal, paid for and carried out on one’s behalf?
Those who have eye watering amounts of wealth, like Hamilton, are surely not completely oblivious to the very public and very heated debate on tax avoidance carried out by people in a similar financial position to him. Which leaves three scenarios:
1) Hamilton chose not to ask his advisors how close to the legal (as defined by the letter of the law) and moral (using said public debate as a barometer) lines in the sand his wealth management strategy would take him, despite knowing this is an issue of significant public interest.
2) Hamilton did ask, and was told that the wealth management strategy he was advised to follow was within the letter of the law, but could potentially raise some eyebrows and in the context of the public debate on tax avoidance, many might find it to be morally questionable. But despite this, he took the position that if he stayed within the letter of the law, that was all that mattered, and he was OK with it anyway.
3) Hamilton did ask, and was told that the wealth management strategy he was advised to follow was within the law and and furthermore, would raise no eyebrows in the context of the public debate on tax avoidance.
The latter seems highly unlikely, and I don’t see how either 1) or 2) are adequate positions for someone as economically fortunate as him to take.
Maybe I am being kind
But the reality is Hamilton would never have thought this up: that’s not his skill. He old not have got near this if someone had not designed that he do so
I do not think he is innocent
But if he has culpability of 2 then the advisers are on 10
‘I race in 19 different countries, so I earn my money in 20 different places and I pay tax in several different places, and I pay a lot here as well.
‘I am contributing to the country and, not only that, I help keep a team of more than 1,000 people employed. I am part of a much bigger picture.’
This is his response to the allegations.
No apology. No sense of contrition. No acknowledgement that he or his advisors have done anything wrong on any level. No suggestion that will seek less questionable financial advice next time.
This is the sort of thing you could easily imagine the likes of Phillip Green to come out with. He believes he is already paying his dues to society and does not see anything wrong with dodgy tax schemes. That says it all.
That is crass
The accusation was on one issue
Not replying is not good enough
And he does not keep all those people employed either. If he was not a driver someone else would be, you can be sure
So his claim is nonsense
But then, he did not write it
If we had Land Valuation Tax, the tax would be collected. Land cannot be taken offshore. LVT is cheap and easy to collect and `cannot` be avoided.
I am sorry but this is too simplistic
Of course we should tax land
But to pretend that is all we should tax is absurd
Tax all “economic rent”, land values is only one part of it. Penalising production (income tax) and trade transactions (VAT), is absurd. Then after they can take all they earn to wherever they like.
OK
How do you identify rent from profit?
There is no theoretical distinction, but it is worth pointing out (in the predicament we are currently grappling with) that the biggest test of a tax is whether it can be charged effectively: how easily can it be avoided or evaded?
Charges on land (AGR; aka LVT) cannot readily be avoided or evaded. I do not say charges on corporate profits cannot be effective, but corporate profit is an abstraction, a function of inherently protean accounting principles and – at the least – in practice more difficult to apply. Tax raising on corporate profits is also, and in consequence of the difference with land, more expensive to execute. These, I submit, are two powerful arguments for AGR.
For the record land taxes are not well paid in the UK
They are evaded
And they are also not paid
The myth that they are guaranteed does not quite stack in practice
In fairness I did not claim they were guaranteed; very little in life is guaranteed (death, and taxes – but not their payment). My point was a comparative one; a land charge in comparison with (corporate, accounting) profits. Here I think the advantage of AGR (LVT) is quite clear.
I do take your wider point, and the problem is perhaps that tax avoidance in the UK has been widely cultivated so that it has become an established cultural norm; eccentrically, even a proof of liberty. It leads to absurdity. I have heard on BBC radio, a programme host/interviewer referring to ISAs as a “tax loophole”; there has been enormous public spin encouraged and exploited by the media, to suggest that the aggressive tax avoidance used in tax havens (including the examples on Panorama) is what any taxpayer would do given only the opportunity, and to complain about it in Britain is the product of mere “envy”. Taxpayers who would almost certainly pay less tax if there were no tax havens, even defend the right of tax haven users effectively to exploit them, because their tax bills are higher than they would be (for everyone) if the avoided taxes were actually paid.
It has to be acknowledged that part of the reason that this bizarre culture prevails in the UK is the appalling, dysfunctional state of the current UK tax system; a house of cards. I would merely end by arguing that AGR fulfils the basic criteria of a sound tax system; fair, effective, understandable, cheap to administer, and difficult to avoid or evade – AGR is sound.
John Warren has it right. The base of tax collection should be AGR (LVT). As land’s location is known to the inch it “cannot” be avoided. The culture in the UK is one of winner takes all and that appropriating commonly created wealth (legalised stealing) is fair game. We have become a nation of “economic rent” seekers. It is so deeply engrained that when talking about reclaiming land values to people most immediately refer to me as a “Communist”, for preventing them taking wealth they did not create. AGR (LVT) promotes the free market, which is rather un-communist, and production. The last I read was that UK land was worth 7.5 trn. That value is locked up not circulating.
https://en.wikipedia.org/wiki/Wankel_engine#Compression-Ignition_Rotary
For those interested an all party Inaugural meeting of APPG on Land Value Capture is Attlee Suite, Portcullis House Houses of Parliament on 6 December, with Labour, Tory, Lib-Dem and Green speakers.
AGR (LVT) is gaining momentum.
LVT is something I support
But look at council tax data: it is nit all paid
And the idea that all value is based on land is absurd.
It’s not even true it is the only rent: there are many
This would just guarantee the rich get richer
Richard I am unaware of any taxation on land in the UK that is worth noting – there is some wrapped up in business rates. If someone defaults on LVT payment a procedure of claiming the levy would be started. That would be similar to what we have now. Courts, bailiffs, seizure of the land to be sold on to pay the unpaid LVT, etc. The value of the land is known and the location of the land is known. Boy is it difficult to evade that.
Except you could say the same of business rates and council tax
And they are not paid
Richard, no one is saying all value is based on land. What is LVT? It is reclaiming commonly created wealth to pay for common services. It is that simple. Land values are created by the economic activity of the community , “not” the landowner. The value locked in the land is “ours”.
Reclaiming what “we” created is one good way to pay for “our” services. Get rid, or vastly reduce, penalizing income and sales taxes and production will soar with productive people being rewarded. Today, far too many make a hell of a good living by appropriating economic rent – these people are economic parasites.
You alluded to that some economic rent is difficult to identify, and that is the case. Some of it clearly is not. HMG should take the low hanging fruit first.
LVT will eliminate many other taxes which is one of its great plus points. The tax system is simplified and cheap to collect. Council Tax is one of the taxes that would be eliminated. With LVT the levy is paid by the “landowner”. Currently Council Tax is paid by the tenant or occupier, not necessarily the landowner, which may be a business or residential tenant. A tenant with no assets can flit, a landowner cannot. Or if he did his asset is their to be seized and sold.
I am at a loss at how you think LVT would only benefit rich people. If it would they would be screaming for it from the high heavens. LVT would benefit “all” people.
I am sorry but that’s utterly simplistic because LVT cannot capture the diversity of commonly created wealth
Ten or more taxes are needed to do that
If you cannot agree you’re wasting time here because I only partake in debate on what is deliverable, and not Angels on Pinheads stuff
Richard I said that at the top. The Henry George Single Tax will not capture all “economic rent”. But LVT would need to be at the core of such a taxation system for its great cascading benefits.
Please don’t go to trickle down…
Richard, back to the future, recognising the commons:
https://www.theguardian.com/commentisfree/2017/nov/08/uk-fairer-share-wealth-ancient-charter-of-forest-common-ownership?CMP=share_btn_fb
I think it takes two to tango Richard. Yes, his accountants and lawyers are to blame, but so is he. Most sportsmen/women and celebrities are aware of tax havens. To say that Lewis Hamilton would have been oblivious to this and the possibilities for reducing or eliminating his tax bill seems incredible to me. Yes he might be focused on the mechanics, but I’m sure he’s not unaware of the piles of money coming into his bank accounts either. I think in this debate that it’s important to go after the tax advisors, lawyers and accountants, but let’s not forget the clients who sought them out.
Let’s put the blame where it really belongs: on governments that choose to tax the wrong thing — private productive contribution — rather than the right one: the publicly created value that, rich, greedy, privileged parasites are legally entitled to take from society without making any commensurate contribution in return. John Burns is right that the most important and lucrative privilege, especially in a densely populated country like the UK, is landed privilege, because land titles enable their owners to take for themselves the full value of public spending on desirable services and infrastructure (if you don’t already know this, Google “Henry George Theorem” and start reading). The landowner effectively gets to pocket everyone else’s taxes. It’s true that bankster privilege and intellectual property monopoly privileges are important, and maybe bankster privilege should be revoked first. But blaming producers for trying to avoid being robbed of their rightful wages by a government that then turns around and shovels the money into landowners’ pockets in return for nothing only reinforces the false, immoral, and destructive notion that wages, rather than the rents of privilege, are an appropriate object of taxation in the first place.
Good post Roy Langston. It got to the root cause of it all in that:
1. We penalise the productive with income, sales and other stealth taxes.
2. We allow economic parasites to walk off with wealth that others have created – appropriating “economic rent” (legalised stealing).