Interesting commentary from Andreas Whittam Smith in the Independent this morning, who says:
What are people angry about? The deepening recession? Yes. The high level of youth unemployment? Yes. The excesses of the bankers? Yes. But more than anything, I believe, people are rattled by the widening gap between the "haves" and the "have-nots". The banners at demonstrations that proclaim, "We are the 99 per cent" speak eloquently to that. "We are getting nothing, while the other 1 per cent is getting everything." Many people think so.
And he concludes:
[G]overnments can make changes in personal taxation. They can deal with the hidden truth about taxes on the very rich: that they are easily avoided.
The millionaire who, when his fortune is made, goes to live in the Isle of Man, is a tax dodger. The rich man who purchases a farm for its tax advantages, even though he has zero knowledge of and interest in agriculture, is a tax dodger. The employees of investment banks who benefited from trusts that gave them non-repayable loans so that they could avoid paying National Insurance (schemes that were subsequently closed down by HM Revenue & Customs) were tax dodgers. Making the rich pay all their taxes would be a good place to start in the enormous task of reducing inequality.
Precisely so.
But the tax profession is clearly already lining up to oppose Graham Aaronson's proposed attack on the most egregious tax abuse schemes.
Will those who support tax abuse never listen?
And why do government's continually listen to the abusers and not those who want to do the tight thing? Why is it so hard to support ethical behaviour?
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Reason why the 99% are not listened to is break down of Democracy. Politicians are remote from the public, Often looking for jobs in business whilst in Parliament and beyond.
The Politicians pay lip service but in fact are part of the 1% or would like to think of themselves in that camp.
I wonder if this 1% vs 99% is coming straight from Saez’s work at Berkeley, given that he gives a breakdown of that figure on page three of Diamond Saez 2011, citing his own papers from 2003 and 2011, a term which has then fed into the OWS protests and then into the UK.
Quote “The millionaire who, when his fortune is made, goes to live in the Isle of Man, is a tax dodger.”
CODSWALLOP!
He pays tax in the Isle of Man!
A fixed, low tax rate
Please tell the truth
So he should be barred from leaving the UK?
He should be taxed by the Uk whilst living in the IoM
Any prudent “retired” millionaire living in the uk can easily pay a low overall rate of tax in the uk, without resorting to using tax havens. The fact that a “rich retiree” may want to actually live on an island with a slower pace of life, with a very low crime rate is obviously irrelevant to you!
Not at all
It just pushes the boundaries of credibility
So he shouldnt pay any tax in the IOM? And why should he pay future taxes in the UK when he no longer lives there?
He should pay full tax in the Uk with credit given for tax paid in the IoM
@zaphod
What is this about very low crime rate?
What category? – riding a bike without lights?
As for the slower pace of life …
Are the locals comatose by the relentless PR churned out by the government?
For how long?
What if he moved to a higher tax jurisdiction, would he recevie a rebate from the UK?
I can’t see how you could ever get this to work.
The US does
What’s the problem?
Richard, I am sorry, but if you have £1,000,000 in the UK, by using a combination of ISAs, Pension Tax Relief, Capital Gains Tax Relief and Income Tax Thresholds, it is easy to minimise your exposure to tax, even eliminate it. You cannot deny it. You are one of the people who says the system favours the rich!
Of course
But I’d change that too…
You don’t think I’d do things one at a time do you?
But the US system doesn’t meet your own tax compliance statement of “Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.”
Paying income tax in a country where you don’t reside and have no plans of ever returning to doesn’t fit the “right place” part.
I imagine you’ll respond referencing your British passport theories, but as has been shown that doesn’t work.
No one has shown my theory does not work
Better to meet all your tax obligations legally and honestly rather than chase a load of sheep in the pouring rain on some wind swept Isle of Man “farm”.
Or is this “farm” just another shell company?
Where it never rains and there are no sheep!
Maybe he/she will have to pay road tax – but little else.
Given that those ruling are the 1%, and that many of those in the top-ranking public servants are also 1%-ers, I see no easy non-violent resolution.
Completely agree!
Surely governments have decided that investing in farming is a public good and therefore encourage it through tax breaks. Whether they are right or not to do so is another matter.
Same as there are tax breaks for investing in venture capital projects or film production.
And soon there will be tax breaks for investing in UK infrastructure. Which this site fully approves of.
Do you have to be “interested” in a new tram system for Ipswich or social housing in Bedford to benefit from the tax breaks ?
The point about inv bankers is well made, but as was said HMRC stopped that loophole pretty quickly.
“The rich man who purchases a farm for its tax advantages, even though he has zero knowledge of and interest in agriculture, is a tax dodger.”
Why is he different to somebody who decides to put in a solar panel because of the feed in tariff, or a person who decides to increase his pension contributions or pay into an ISA?
People change their behaviour as a result of legislation. Tax legislation may make the difference between choosing to do one thing rather than another (for example, air passenger duty may be a factor in deciding to travel in he UK rather than by air). Or does that make the person who goes by rail to Cornwall a tax dodger if they could afford to fly to the Maldives?
Surely part of the point of tax is to encourage people to do one thing in preference to another? The person who buys a farm because there are tax breaks to do so is being encouraged by the government to buy the farm.
This abuse is well known though – hence legislation to try to stop it consistent with the logic of tax compliance
Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
What ridiculous comparisons from someone who obviously knows little about farming.
Farming is a 24 hour 7 day a week vocation pursued only by those with commitment to hard work and driven by a geuine interest in livestock husbandry … it has nothing to do with solar panels and ISAs
Remarks like this are often posted by those only interested in defending tax dodging
is it just the isle of man that you have an issue with, or is it wider? assume jersey and guernsey are also bad, but what about luxembourg or ireland for example?
Read the Financial Secrecy Index and open your minbd
As I do
“He should be taxed by the UK whilst living in the IoM”
What authority does the UK have to tax the residents of the Isle of Man?
The UK has a right to establish taxing rights over citizens – including those abroad, and does
What, over citizens of any country? Surely not. If someone is resident solely in the IOM lock, stock and barrel then I don’t see how the UK can tax him. Of course he’ll be taxed on UK income but that is the same for residents and non-residents. What I am referring to is someone living in the IOM in receipt of Australian bank interest, say? How the hell can the UK tax him on that?
Did I suggest the UK tax citizens of other countries?
Why do people always create straw men?
Mind you, given the IoM is only not taxed by UK concession you’ve got me thinking now….
“This abuse is well known though — hence legislation to try to stop it consistent with the logic of tax compliance”
How is it “abuse” to buy a farm in order to avail oneself of a tax relief specifically provided by legislation?
Have you noticed that we’re getting a GAAR to stop abuse of legislation when relief was not intended?
Is putting in solar panels just to get the feed in tariff abuse too?
Though given what is happening to solar panel prices, the feed in tariff will collapse as the cost of the panels collapse. The subsidy of solar panels is going to turn out to be a massive waste of money.
“Have you noticed that we’re getting a GAAR to stop abuse of legislation when relief was not intended?”
But this would do nothing to stop a tax payer enjoying the benefit of a relief to which he was entitled by law, which was consistent with the wording of the law and with usual commercial practice, not withstanding that you or Mr Whittham Smith might decide that they were an undeserving recipient from the “1%”.
its starting to become pointless having a sensible discussion about tax on here.
your millionaire probably paid 10% tax on his millions assuming he sold his company – i assume everyone on here will be up in arms about it…………unfortunately this is perfectly legal and uses no offshore havens or any other “clever” planning.
If someone moves to another country and becomes non-UK tax resident then Im afraid that is the end. so in my example the millionaire paid 10% tax on his gain, moves to the bahamas and is no longer a uk tax resident. He no longer benefits from any of the roads, NHS or other services provided in the UK. By what logic do you seek to continue to tax him?
SteveT
No it is you who does not make sensible suggestions
The reality is that significant parts of the UK economy are broken – bar things like the NHS that work now but won’t soon
Enforcing tax is one way to create the level playing field we need to build prosperity
That is what I propose
And I am suggesting all who want a passport pay tax in the UK – unless they live in a properly taxed state e.g. an EU one
It so happens all tax havens would be caught
And it was seriously considered by the Treasury
But the passport tax idea is just a petulant and childish attempt to force people to move their wealth to another vehicle or hand back their British passport.
People move abroad and expect to pay the tax due locally, whether that is low or high, in a temper you simply cry out that “that’s unfair” and demand a tax based on their passport.
In return they take local citizen status or transfer their weath to their wife, trust, local company etc. Result is you still don’t get the money but you make their life a little more difficult. What a hero……forget results……just attack them on principle….
A passport tax would be a blatant attack on the abuse of tax havens by those seeking to free-ride society
That’s exactly what it is about
I think you show where you are by your opposition to it
I have a British passport. I was not born in the UK. I have never lived in the UK. I have never earned money in the UK. I was not educated in the UK.
I do not use UK roads or railway systems or other forms of public transport.
Why would I pay UK tax just because I have a British passport because my grandfather happened to be British?
Its the most ridiculous proposal that you’ve come up with yet to levy a tax on British passports.
You say it works in the US. One reason it works is because the US does not and did not have a global empire. The USA is the US territory, I think possibly with the exception of Guam as a unique forces base. Its therefore far more feasible for the USA to tax its citizens.
Great Britain and the United Kingdom are not one and the same thing. The UK is the land territory of England, Scotland (currently at least), Wales and Northern Ireland. Britain has many associated overseas territories – a crucial difference with the USA.
You may always renounce your British passport
And if you live in a state with an acceptable tax system you would pay no more tax under the scheme I propose
If you live in a tax haven you would
Tax havens are seeking to destroy democracy and undermine the world economy. Tackling those who use them is one way to stop the abuse
It is essential we do so
Richard,
While I’m totally in favour of stopping tax abuse, I am pretty perplexed by what you seem to be suggesting here, which as far as I can see (which I admit isn’t far as this is not my field), must be pretty much unworkable. The obvious question that comes to mind is where and how do you draw the lines?
What about the ‘Manx’ people – those who were born and have lived all their lives there or have spent some time working in UK and return to retire in IoM? They too have British passports (and no other)! Are you therefore suggesting that all Manx residents pay tax in UK on top of the (lower) tax they pay in IoM?! If not, where and how do you draw that particular line?
How does the UK decide which states have “an acceptable tax system”? Does the UK really have the right to tax its citizens, wherever they live? I guess I have a different perspective, living as I have done for the last 30 years in France, which (whether it has the “right” or not – I don’t know) taxes all its residents (but not as such its citizens) on world-wide income. Which actually seems to me to be an eminently more sensible system, since the public services I benefit from are those provided by the French state. I realise of course that it is precisely to deal with conflicting systems such as this that bilateral ‘double taxation’ treaties exist – as a result of which I pay no UK tax (including on my UK pensions which are taxed in France along with my French pensions and world-wide interest etc). I certainly have no qualms about that: while I lived and worked in UK, I paid taxes and used services there; now the same applies in France and I fail to see what role my citizenship should play in that, nor do I see why I should be forced to abandon my British citizenship.
OK – maybe I’ve answered my own question on the second point: it all gets sorted through the plethora of double-taxation treaties between states? But the problem with the Crown Dependencies is clearly particular. Is the IoM a state or not? I assume there is a double taxation agreement of some sort between IoM and UK? Are you suggesting it be changed to make all Manx residents liable to UK tax? The ‘genuine’ Manx (there are some!) would really love that – and you can hardly take away the only citizenship to which they have a right, leaving them stateless.
As I understand it, places like the IoM can have lower tax rates because they profit from the huge financial services industry which works because it facilitates tax avoidance/evasion. So surely, the only real way to tackle this is to put a stop to those activities by measures such as the proposed GAAR, so that there is no longer any advantage in migrating simply to minimise one’s tax bill?
At the same time, how much is ‘lost’ in UK tax by allowing (rich) foreign nationals legally to live in UK and benefit from its services without paying tax (which I gather is what ‘non-doms’ can do)?
The proposal is that all those living in an EU state and with tax systems like them (i.e. comprehensive base and reasonable rates) would not be in the slightest bit affected by this proposal
Of course it challenges tax havens
It is meant to
But then as the passport shows, the pretence that the Isel of Man is not part of the Uk is just that – a pretence
And yes, maybe the time for that pretence to end has arrived. We can no longer afford it, so let’ stop it, now
Your idea makes no sense, and is ill thought out. For example, there are a great many British passport holders who reside outside of the UK with no plans to return but are unable to gain citizenship in their chosen country until they have been resident for a substantial period of time (UAE for example).
Plus, what constitutes an “acceptable tax system”? Who decides that?
Acceptable tax system is easy – comprehensive base, reasonable rates and information sharing with UK. Done. The list could be settled in 99% of cases in 15 minutes
And for those in UAE – sorry, that’s bad luck.
That’s the price of beating tax abuse.
We do that or lose society. It’s a price worth paying
Your comments just show how ludicrous your idea is, as you suddenly remove the ability for anyone who wants to work outside their home country. Which would actually hinder developing countries who require the expertise of workers from developed countries. Plus it goes against the whole idea of your tax compliance statement.
As for your acceptable system, what about places with no need for income tax (such as commodity rich states such as the UAE).
Developing countries were specifically covered by the proposal I put to the Treasury
People working there were exempted unless earning more than an agreed sum. I think it as £30,000 – a de mimimis rather like that applied by the US for this reason
Next objection?
And the needs of a place like UAE do not concern me.
UK people paying tax does
You won’t win this one – as the Treasury and others said – it’s just a decade away
So every UK passport holder working abroad would have to move to the UK if they were unable to gain citizenship in the country they were working (unless it was a developing country) unless they were prepared to pay tax in contravention of your own tax compliance mission statement?
Again you deliberately miss what i said
I made very clear there would also be ‘white states’ – those with acceptable tax systems.
Candidly only those from the UK in tax havens would have this law applied
But as usually you deliberately miss the point
Is that because you promote tax evasion in tax havens? I’m struggling for another explanation
Apologies, I forgot you said about acceptable countries. But it would be far higher than UK people in tax havens. It would also include any UK person in the middle east for example.
Plus it would impact the local born person who has no real choice where he resides, and may have no connection with the UK or the finance sector.
Shucks
That’s the price of beatin tax abuse I guess
And you claim to care about people?
Of course I do
But I care about people here
And people in need
And the 99%
Sp I chose to places the interests of the 1% and the tax dodgers rather low on my list if priorities as the duty of care to them is low
But to date government has made it their priority
And that’s why we need radical reform
I have a choice – to meet need, or help tax dodgers. You choose dodgers. I choose need. It’s the difference between us
Just to point out that the Tax Profession is not one monolithic enterprise. There is much support for your ideas RM in parts of the tax profession.For just one example in the area I deal with, that is small and medium sized enterprises, my clients are pretty hacked off by the use of tax havens by larger companies. The frustrating thing is, in the profession, we fully know who the really agressive tax “e-voiders” are. They are often legal firms,accountancy firms are not immune of course, but lawyers tend to be uba agressive (and banks too in their advice).Proper registration and effective control of the tax profession is needed in my opinion. It’s going that way, but there has been a lot of pussy footing in its progress.
Then why don’t those who agree say so?
That’s a good question and I don’t fully understand the reason. I think it is institutional.
I have spoken to many Chartered Accountants who would agree to varying extents with you. But I think the my own Institute is lagging behind, some might say because the Big 4 control it, but I could not possibly comment ! But I believe that your pressure is beginning to tell, this stuff was completely under the carpet not long ago,at least it’s being discussed now.
Sorry to throw in something you might not want to hear (!) but the Coalition are much more interested in Avoidance/Evasion than Labour were,( I am party a little to news), but they are broke of course.
“But then as the passport shows, the pretence that the Isel of Man is not part of the Uk is just that — a pretence
And yes, maybe the time for that pretence to end has arrived. We can no longer afford it, so let’ stop it, now”
Quite so. Could be interesting times ahead! Maybe it’s indeed time for them – and also Jersey & Guernsey – to decide whether they are in or out, rather than “in” when it suits them and “out” when it doesn’t. Same goes for the City of London Inc?
Giving Independence to the City is an interesting idea!
Isn’t it just – maybe it could be excised and floated off down the Thames 🙂
Then it could be made to pay excision duty!
But seriously, what is the real difference between the Isle of Man and the City – other than that the latter is immensely richer?