The Telegraph has reported that:
Ed Miliband's most senior adviser pays no tax on his reported £300,000 earnings in Britain, The Telegraph has learned.
David Axelrod, a former adviser to Barack Obama, admitted that he is not resident for tax purposes in the UK.
I am all in favour of debate on tax and tax abuse but this is ridiculous.
I can also say that the Telegraph knows this because one of the two journalists who wrote this story called me yesterday. I said three things.
The first was that David Axelrod was, as far as I know, US resident so paid tax there on his worldwide income. And if, as was likely, he used a US corporation many of these are what are called 'tax transparent' so do not save the individual tax, unlike here.
Second, as far as I knew he did not spend much time here and so was unlikely to be UK resident.
And third, therefore, tax could not be due in the UK. I explained that his services were imported into the UK and imported services do not make the supplier tax resident in the country to which they supply their expertise.
I explained this using a personal example: I have supplied services paid for by the EU on a number of occasions but that has never once made me Belgian resident and it would be absurd to suggest it did, or that I should pay tax in Belgium as a result.
This though was ignored by the Telegraph and the demand has been made that a supply of services should make people taxable in the state to which they supply them. This would, apparently, be ethical in their view.
Now that should be fun for the UK. We survive solely on the supply of invisible export earnings i.e. from the sale of export services, all of which should make those doing the exporting taxable in the destination country using the Telegraph's logic. That will slash the UK's tax yield overnight, especially from the City.
Those writing this stuff really need to engage their brains before doing so.
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You misunderstand the Telegraph’s position. Export services should only be taxed in the destination country if that country is the UK. It’s known as the have-your-cake-and-eat-it prinicple.
You misunderstand the Telegraph’s position. Export services should only be taxed if trying to make an anti-Labour party political point.
Whoever take the headlines on Daily Mail, Daily Telegraph and other Rightwing media as TRUTH needs their head look at.
Obviously their are very afraid of Labour getting into power.
Goodness me – the levels of ignorance and mis-information presented to the public on these issues is staggering.
The other day the Daily Mail was screaming about the pay of HA CEO’s and making them out to be self interested and greedy in their opposition to HA RTB.
Neglecting of course to mention how much money the financial sector will make out of the proposed RTB for housing associations – oh and the legal profession too.
But that’s what the neo-lib mindset is good at – presenting even sensible reasons for not doing the wrong thing as an attack on personal freedom. They do this over and over again.
Is the man in the street really going to see a difference with the amazon situation though. If amazon get rid of their warehouses in the uk and send the books from the US and Luxembourg then isn’t the situation v similar?
No
I knew someone would raise this
Amazon ship from the UK
From depots in the UK
So they should be paying here
As Google have offices here signing contracts here and so should pay in the UK
If you can’t spot the difference I suggest you don’t comment
I think “Anth” can spot the difference which is why he asked the question that he did ask. I think Richard has answered a different question.
Respectfully, I disagree on both issues
I wasn’t trying to be controversial, I was talking from a man in the street view of it for that reason. If amazon take their warehouses offshore, eg to the US, then the man in the street will see no difference in the scenarios
If mr axel rod lived in the Cayman Islands would you have a different view?
a) Yes they would see a difference. Delivery would take a lot longer. Don’t be daft
b) No, not if he really lived there
Anth seems a bit confused but has a ‘sort of’ point.
If Amazon Eurl used the Post office (or DHL or some other parcel delivery service) here in the UK to deliver its parcels then you would presumably accept that Amazon Eurl should not pay UK tax?
If Amazon shipped wholly into the UK I could not argue they were ULK tax resident
But they have 15,000 people here
So shall we deal with facts and not make believe?
The ‘facts’ are that Amazon Eurl employs no-one in the UK and owns no property in the UK.
You may be right that the law should be changed to ignore this fact and look at Amazon as one business entity but until the law is changed those are the facts.
Should we not deal with the position as it is rather than the position as you would like it to be?
And as is widely acknowledged this is a fabrication to achieve a tax avoidance objective
Pointless Hypothesis, won’t happen. They are in the UK for reasons other than tax.
Richard,
One of my concerns as it relates to this matter deals with one of our major tenets: taxing of income where the economic activity takes place. As far as I can see: Mr. Axelrod is performing his work in the UK; He is being paid with funds which, by law, are wholly UK generated; His work could possibly have major ramifications for the UK (in terms of elections won, policy changes, etc).
These factors make me intuitively feel he should be taxed on this, patently, UK income. No doubt I may be missing a key factor here, more than happy to be set straight.
But he is not resident here
He exports services to here
And if he was taxed here is everyone who exports services into the UK but has no presence here to be taxed?
Of course there is an issue about not pretending to have a presence here when you have – which is Amazon and Google
But if you really have no presence here – apart from the odd visit – does selling into the UK create a tax liability here?
No serious discussion on tax has ever suggested that
And at what rate? Which is a serious issue when the related expenses are incurred elsewhere – in the US here? How is that to be managed?
Sorry, but this idea does not work
Richard,
Many thanks for your cogent, and comprehensive, answer.
I’m not resident for tax purposes in the UK either, but I have to pay tax on my UK tax on my UK sourced income. Good to see you campaigning against this.
But that is not UK sourced income
If you don’t know that, you know nothing about tax
As I always thought
So if I use a company outside the UK to provide services to the UK that I currently use a company located in the UK for, you’d be ok with that?
If that is an artificial arrangement for a service actually supplied from the UK that would be a fraud if tax was not paid here
If I’m not resident in the UK, and the new company is not in the UK, that’d be ok then? Am I paying more tax than I should by not being UK resident but running my UK services through a UK company?
You miss the point
If you have a company, wherever incorporated, supplying UK services from the UYK it must pay tax here
If you don’t get that please don’t call again
David Axelrod is fortunate he didn’t find this work through a UK agency. Employment agencies are notorious for insisting that work is done through a UK company. I have personal experience of an agency insisting that an Isle of Man resident can’t do work in the Isle of Man for an Isle of Man business through an Isle of Man company. The only options on offer were a UK company or UK PAYE.
wasn’t there an issue about precisely this matter a few years ago? I distinctly recall that for a period athletes wouldn’t run in the UK because they would be taxed on a proportion of their worldwide income if they did.
The other issue of course is whether it is right that both major parties feel the need to employ at great expense supposed experts who have no knowledge of the UK to advise on electoral strategy. After this election, one of Crosby or Axelrod will emerge as a “genius” who can win under any circumstances, the other will be a “failure”. It’s a bit of a repeat of the genius-CEO myth. I am sure there is similar expertise available in the UK, at lesser cost, which will pay tax here. All that is missing is the will to use it.
There are special rules for sports people and performers in many countries including the UK
We are not discussing them
But if a Non-dom has an Australian income then they should be taxed in Australia, not the UK. The only time they should be taxed is when the money is brought into the UK. Is that what you are saying??
Not if the service is supplied in the UK
Are you deliberately missing the point?
My question was if an investment in an Australian company or something I don’t care what is made in Australia. Yet the person is a UK resident non dom then they don’t pay.
Last week you were in favour of taxing Brits around the World, which is what happens on removal of some peoples non doms. This week its different?
Your questions make no sense
I have no clue wnhat you are trying to say – which is why I have deleted a number of your comments
There should be a legal or regulatory requirement for the Telegraph to declare the tax status of their proprietors when writing this sort of thing.
“Amazon ship from the UK
From depots in the UK
So they should be paying here
As Google have offices here signing contracts here and so should pay in the UK
If you can’t spot the difference I suggest you don’t comment”
But surely Amazon Eurl is not the same as Amazon UK Limited?
I’m fairly sure Amazon Eurl do not ship from the UK. Nor do they own depots in the UK.
Isn’t That is the difference? They are two different companies, two different legal entities. That is the law as it is at present. Amazon Eurl should not, under current law, be paying UK tax.
You may wish the law was different but it is not.
Google say they do not have offices which sign contracts in the UK. If you have evidence that they do you should report it to the authorities.
You seem to be ‘assuming’ that Amazon and Google are lying about their tax affairs or wishing the law was different than it actually is.
This is boring and has been debated endlessly
And as we also know the facts are disputed
I can’t be bothered to waste time on old facts which the EU is now consdiering
I am sorry if you find the law as it is boring and can’t be bothered with facts you don’t like but I hope you realise that the real world operates under exisiting law and fact not under a wish list you have created.
You cannot complain that the average ‘man in the street’ is confused and may be outraged by The Telegraph story if you try to debate what is happening in the real world using a framework of your own based on a fantasy tax world which does not exist.
With respect, I did no such thing
I discussed the world as it is
With which I am very familiar
Quite bluntly, you need to have some real knowledge of UK tax law as regards, residence and domicile to comment intelligently on this. Starting from there, one mght have a number of different views on whether the law should be changed, but unless you understand the law as it is, it’s all just hot air. That’s you, telegraph journalists!
For all those who don’t get it, Richard was commenting on the operation of the law as it is and not about whether the law was a good idea.
I’m more concerned about the Labour Party paying someone £300,000 whilst asking for donations from a hard pressed public (including me).
I’m sort of hoping they did not pay that….
I reckon I had more impact with the non-dom rule, for nothing
Simon,
Agreed. This eye watering amount is nothing short of obscene.
After watching the debate this evening, it does not appear it was money well spent, as well.
Natalie was strong and has certainly sewn up my vote with her powerful performance tonight.
The most galling thing about paying my taxes isn’t the amount, it’s the knowledge that people earning a little more than I do pay no tax.
Not ‘Less tax as a percentage of earnings’.
Not ‘Less tax in total’.
No tax at all on their income, earned in this country, in the same building, on the same floor that I work on.
Somewhere between £150,000 and £250,000 of UK income, personal taxation becomes a voluntary arrangement.
As that threshold comes further down, we get closer to Greece, where the citizens regard their tax system with contempt; and who would be such a fool as to pay their taxes when they know damn’ well that everyone around them pays nothing, and would regard an honest fool with derision and contempt?
Nile
I have to say the voluntary arrangement idea at that income level is rarely true
The cut off is higher
Richard
Gosh, I wonder how much tax is paid on UK earnings by the editors and the proprietor of the paper that published this shocking news?
…And if I am galled to know that I am paying taxes when others pay nothing on a higher income, what must it be like to be the hack that writes such specious articles, or their sub-editor, knowing that their precarious earnings and their taxes subsidise a tax-free life of luxury for their senior management and their proprietors ?
What was the VAT position?
I cannot say
I am not privy
But you should be well aware of the VAT rules on the import of services, which are not, admittedly, straightforward
By his own admission, Axelrod is in frequent communication with the Labour high command, has visited the country 4 times and will be in the UK in the run into the elections.
Makes one think.
Yes, it does
It makes me think I have been in Paris several times this year and will never be French resident
So it makes me think you’re a fool
And were you employed by any organisation in Paris? That required you to visit? Thought not!
Axelrod is advising Labour Party – that is why he is visiting – he is rendering services in the UK.
Shows how little you know about UK tax.You don’t have to be a resident to be taxed in the UK. Non-residents are taxed in the UK if the source of income is UK. A fundamental principle of the residence basis of taxation.
So, we now know you are a fool!
OK
I go an visit a client in the UK
Am I employed by them?
Or supplying them services?
And why is it different if my client is in Brussels, as has been the case on a number of occasions?
Please explain why you think it is different
And why it is impossible to export services
I think the real point here is that if you provide services to a UK resident whilst you are in the UK they are taxable in the UK whether you are tax resident or not (and that would appear to be happening here).
However the UK/USA Tax Treaty specifically exempts this income unless he has a permanent establishment in the UK. For example if he had an office of his own it would be taxable income. You have to assume he will avoid creating a permanent establishment in that by using the Labour Party offices.
I think we should call it an avoided PE and charge the labour party 25% tax on the profit 😉 [yes this is a joke]
These comments may not have taken the debate forward at all, but they have certainly given me a good chuckle!!
Sometimes it is good to not let the facts get in the way…