Amongst the very limited good news in this week's budget was the announcement that the likes of Amazon and eBay are to be made liable for the VAT fraud that has been endemic on their trading platforms. The Guardian covers the story here. It has, of course, been referred to many times on this blog. Even HMRC admit the cost to be at least £1.2 billion a year and to date their efforts to collect the money have been pathetic, at best.
But one man has beaten them into submission. I take my hat off to Richard Allen, whose single handed campaign against this abuse has been fundamental to the Public Accounts Committee taking it up, and now to action resulting.
There are very few people who singlehandedly take action that improves their government's fortunes by £1.2 billion, but Richard has.
And what has been his reward? Nothing so far.
When tax cheats get knighthoods I am aware Richard has never received a note of thanks. And that is something that does need to change. If a person deserved an honour for services to the UK's well being Richard does. But that's not the way the UK honours system works.
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Tax evasion is seen as cool and clever by too many people in this country. People who should know better.
From personal experience with those around me, evading tax is how over-leveraged people can actually afford to take on more risk and crawl up and make money from the property market.
I know people who do this who read the Guardian and moan about the state of the country.
It is chronic typical English middle class hypocrisy.
Excellent news and quite right about the honours. If only the PAC had been as receptive to Nicholas Wilson’s exposure of HSBC fraud too though:
https://medium.com/insurge-intelligence/death-drugs-and-hsbc-355ed9ef5316
When I was managing editor of International Tax Review we covered this extensively. We were full of admiration for his conviction, staying power and determination. All he wanted was fairness.
Thanks Ralph
Unrelated observation. The reason this country got compulsory education when it did was because the wealthy business owners of that time realised that they needed a work force that was much more literate and numerate. The government kindly produced the legislation required and organised schooling to the required standard. Given the ongoing whining that the education is not producing the required skills maybe these businesses could be told that not paying tax is a sure way to make the situation worse.
Indeed
But what amazes me are three things. The first is how hard we make young people work. The second us how high their level of achievement is. The third is how little business uses their skills.
“But what amazes me are three things. The first is how hard we make young people work. The second us how high their level of achievement is. The third is how little business uses their skills.”
Currently ‘business’ is not employing skills because it is also not employing capital. There is not enough investment. This simply put is why Phillip Hammond is bemoaning the parlous state of ‘productivity’. His budget does bugger-all to address this fundamental problem in our economy.
The ‘free market’ capitalist system is not working well, even at the things it is supposed to be good at. It is simply not ‘doing the business’. The focus is all on making money and not on actually producing anything useful in terms of goods and services. Furthermore having screwed up the profits the daft buggers don’t know what to do with the piles of cash they have accrued. What we have is corporate paranoia – having piled up the cash the name of the game is how to hide it and make sure nobody else can get their hands on it.
The capitalist system is based on the idea (and it is a sound one, in essence) that money needs to be gathered in biggish lumps to be able to invest in wealth producing enterprises. We have now drifted into a condition where the piles of money are so big (and in so few hands) that they have become a liability to be defended rather than an asset to be employed.
It’s lack of economic demand.
I realise that the rich tend to stay put and so we might be able to tax some of their property, but presumably the huge amounts in tax havens abroad indicate that lots of their wealth does not?
Has anyone done any research on how low the tax rates have to be for the rich NOT to move their wealth into tax havens?
After all, they are the ones who decide whether or not to pay it, under our current rules.
But after a decade or more of campaigning we now have tax havens sending data on who has accounts there to the account holders home tax authority
Of course it may not work
But I am optimistic
I think you are right to be sceptical – won’t the tax havens just run rings round HMRC et al in the declaration processes? After all, they have an existential incentive whereas HMRC are pitifully understaffed and have hardly covered themselves in glory on this subject so far?
Better to put tax havens out of business permanently I say, but I’ve not seen any data on what rate would be low enough to encourage the rich to not move their wealth in the first place.
The pronouncements over the last few years from some in the public eye are quite encouraging – we already know that many on the Left would be willing to pay their fair share, as long as everyone else was obliged to as well.
There is a clear risk of non compliance but the reality is those with money may not rely on that so it will work anyway
Understood – the rich may decide not to take the risk if we can create sufficient uncertainty.
I still puzzle about the original question though – surely someone should have done some research on what tax rate the rich are willing to pay?
The existence of tax havens presumably tells us it’s a fair bit less than WE might think fair, but what research has been done about what rate THEY think is fair?
What a very odd question
The rich should pay what is democratically decided
Are you suggesting they should have an opt out?
“… what research has been done about what rate THEY think is fair?” It seems that the govt has asked them that question and the answer came back: “Nothing”.
Certainly not one that we should try to enshrine in law, but it strikes me that the rich have lots of “opt-outs” already, that we cannot easily prevent?
Tax havens are an obvious one of course, and we might be able to create enough uncertainty to damage them, but when you combine the small numbers of rich people who do things like emigrate, change their citizenship (for U.S citizens), invest in dodgy film projects, retire early, make gifts to their family or just give away $18bn to a charity they own (extraordinary that George Soros is able to avoid so much tax and even set it against other profits – https://www.wsj.com/articles/george-soross-18-billion-tax-shelter-1511465095) that all adds up to a lot of different avenues we will need to shut down. At the rate HMRC moves it will take decades, and every time they shut one scheme down a new one pops up!
Surely better to save all that expense and time and just kill all avoidance stone dead – tax the rich the highest rates they are willing to pay and be done with it. An endless arms race will surely always end in our qualified defeat, unless we are willing to enact truly draconian measures?
I appreciate the rich SHOULD pay what is democratically decided if they or their money wish to remain in our country, but the existence of tax havens indicates that they often choose not to – if we all democratically decided to create a low marginal rate for supranormal earnings, that would work?
Is there a country where the tax rate rises the more you earn and then falls after a certain point?
Say 0% on the first £x (an amount equal to the Minimum Wage makes sense – we surely cannot justify taxing people on an amount we have decided is the minimum they need to live?!)
Then 20% on the next £40K
Then 40% on the next £100K
Then 10% on every £ after that
The figures are just examples of course, but does any country do something like that already?
Let me ask a simple question. This is, why do you want to increase income and wealth inequality when it is known to be deeply destructive of societies? And is already extreme?
There are countries that do as you suggest. They are called tax havens. Start with The Isle of Man and move on from there
And there are good reasons why their role is widely derided
And why we have now chosen to make sure that the activities of the wealthy in such places should be known, at least by tax authorities
Please give me a reasoned argument for your case, or I will be deleting further comments
Sorry, my written English is not perfect I know – I don’t WANT to increase income wealth and inequality (surely no-one actually has that as a goal?) and I understand it is deeply destructive of societies, but I accept that it might be a consequence that emerges from the best we can do – the maximum tax yield given the other freedoms we are unwilling to suspend in order to get more.
I have an additional concern – we know that rich people stay put, but that’s presumably because they can move their money into tax havens instead. If we successfully prevent them from moving their money into tax havens, will they STILL stay put?
I am not aware of what these other freedoms are
We are demanding automatic information exchange from tax havens to tackle capital flight by the wealthy
We will be able to trace them in future….
“why do you want to increase income and wealth inequality when it is known to be deeply destructive of societies”
I thought you said that. So if this really is the most pressing issue of the day, and is ‘deeply destructive’, let’s set tax at a level which means they do leave. Inequality would plummet.
Politely, that is crass because it does not solve the problem: it just pretends it does not exist
Good post. Certainly, if we had an honours system worthy of that name Richard Allen would thoroughly deserve one. As it is I regard our honours system as so utterly tainted that I would certainly very publicly refuse one were it offered to me.
HMRC budget is getting cut over the next 3 years according to the figures just released
Link?