Osborne discovers that the rich avoid paying tax

[ahinton]

Come the time, we're all going to need to be scrupulous in gaining accurate information on all this if accountability in the revelation is to be matched by honesty in the reception. For now, verification by INLR that said returns are all present and correct will have to suffice. First things first.

OK but, as I implied previously, even if the data returned is honest, complete and accurate, most of us would still be able to deduce very little from reading it beyond the amounts of taxable income (both earned and invested), taxable acquisitions and disposals and other matters that must be entered on a tax return; it won't tell anyone what non-taxable income, acquisitions and disposals et al any individual may have to his/her name, so the information provided will be limited accordingly. Add to this the fact that most of us will have insufficient understanding of the full significance of what we might read on such tax returns and the sheer pointlessness of the exercise becomes more apparent still.

THEN we need a government to simplify the tax systems, as you say.

But why wait (other than because no government seems willing to seize upon the opportunity to do it)? I really do believe that the sheer overwhelming complexity of the British tax system is of greater significance and requires more urgent attention than the exploitation of loopholes within it, many of which would be closed in any case were such simplifications implemented. I suspect that the only way in which a government might be persuaded to address it would be if it were to be faced with the results of a credible organisation's in-depth survey of the various costs involved in running the tax system along with comparisons with the gross amounts of tax generated, accompanied by an alternative much simpler version with the same comparative figures.

[teamsaint]

the overcomplicated system we have is inextricably linked to avoidance, and tax rates.

It really needs sorting, not least so that incentives to contribute economically are maximised.
The big increase in income tax personal allowance could have a been a great start point in this process, a process which in an ideal world would include closer integration with the benefits system.
These changes could easily be implemented in a way that benefits the less well off, if that is what you want.
(although I doubt this is what gideon and dave want).

[MrGongGong]

I think part of our problem is that in the UK we have a culture that seems to see paying Tax as either

a: Some kind of legalised theft by the government
or
b: Something to be avoided at all costs , after all they will only waste it on the undeserving anyway

So on behalf of all of those who have been paying i'd like to say thanks for paying the surgeon who did my operation a couple of months ago , there's no way that I could have afforded it and probably would have died without.

and to repeat something I've said before about scripts........ part of the "script" is

"We pay too much tax in the UK" ........ which we don't

[teamsaint]

I think part of our problem is that in the UK we have a culture that seems to see paying Tax as either

a: Some kind of legalised theft by the government
or
b: Something to be avoided at all costs , after all they will only waste it on the undeserving anyway

So on behalf of all of those who have been paying i'd like to say thanks for paying the surgeon who did my operation a couple of months ago , there's no way that I could have afforded it and probably would have died without.

and to repeat something I've said before about scripts........ part of the "script" is

"We pay too much tax in the UK" ........ which we don't

we could pay less if we competed in fewer wars, saved money on subsidising the rich via tax loopholes etc etc.

And we could even afford better public services.
Win win.

[ahinton]

the overcomplicated system we have is inextricably linked to avoidance

Only up to a point, I think; some people would go to any lengths to avoid paying every penny possible, but I do agree that, the more complex the tax system, the greater the likelihood of errors on taxpayers' and MRMC's part and the more likely that avoidance techniques will be put into practice.

The big increase in income tax personal allowance could have a been a great start point in this process, a process which in an ideal world would include closer integration with the benefits system.
These changes could easily be implemented in a way that benefits the less well off, if that is what you want.

But the personal income tax allowance is yet another government sponsored tax avoidance measure - not that I'm criticising it at all, of course, but that's what it is nonetheless.

[ahinton]

I think part of our problem is that in the UK we have a culture that seems to see paying Tax as either

a: Some kind of legalised theft by the government
or
b: Something to be avoided at all costs , after all they will only waste it on the undeserving anyway

So on behalf of all of those who have been paying i'd like to say thanks for paying the surgeon who did my operation a couple of months ago , there's no way that I could have afforded it and probably would have died without.

and to repeat something I've said before about scripts........ part of the "script" is

"We pay too much tax in the UK" ........ which we don't

I'm mightily glad that your operation was a success (which I assume it was) and, of course, if we're to have a state health provision system, it has to be funded principally via taxes; to that extent, as long as it all works well and efficiently (including the funding), tax is not legalised theft by the government. But that's just one example that proves that it's not; there are others where such clear proof is far harder to come by.

I have been fortunate to date in not requiring much from the state health service, but I do maintain a private health insurance policy as well just in case and have used it on occasion; I don't believe that the state can, or can reasonably be expected to, provide all healthcare for all at all times, funded by the taxpayer, because the demands upon the health service increase by the second and taxpayers simply could not possibly afford to fund it completely.

[teamsaint]

Only up to a point, I think; some people would go to any lengths to avoid paying every penny possible, but I do agree that, the more complex the tax system, the greater the likelihood of errors on taxpayers' and MRMC's part and the more likely that avoidance techniques will be put into practice.


But the personal income tax allowance is yet another government sponsored tax avoidance measure - not that I'm criticising it at all, of course, but that's what it is nonetheless.

well you are quite right, it is, and its just part of a whole very complex system
In my opinion , a high personal allowance , allied to an integrated benefits system, is generally good for the less well off, but I know that there are some sophisticated arguments that suggest that this model is actually beneficial for the very well off, at the expense of those at the bottom

[ahinton]

well you are quite right, it is, and its just part of a whole very complex system
In my opinion , a high personal allowance , allied to an integrated benefits system, is generally good for the less well off, but I know that there are some sophisticated arguments that suggest that this model is actually beneficial for the very well off, at the expense of those at the bottom

I've heard this, too, although I am less than clear about the logic that determines it to be the case. Under the present income tax system, the personal allowance gets phased out for those whose taxable incomes exceed £100K and at some point beyond that (can't remember exactly what just now) it disappears altogether, so those on high incomes no longer benefit from the personal income tax allowance. Also, the higher personal income tax allowances which those over 65 and those over 75 have long enjoyed are supposed to disappear next tax year. I'm not suggesting that there's no validity in the arguments that you mention but, if there is, I have no idea on what it may be based. Capital gains tax personal allowances and rates are, however, the same for everyone regardless of their taxable incomes or the gains in value of any items disposed of.

[Lateralthinking1]

I made the mistake of omitting the thousands of employees of HMRC and DWP who would face redundancy as a direct consequence; it's a tough sacrifice, I know, but the benefits paid out to them until they can find alternative work would be a small price to pay for it

Ah, but many won't find alternative work. We all know the barriers - few jobs being created; most of the help being given to those under 24; negative perceptions of the middle aged, irrespective of the legislation; narrow work experience, however lengthy. Those are the main reasons. Now to the more interesting part. I see this discussion appearing regularly on the forum. It always focuses on the money or the political values people have. There is a deeper framework that many rather naively tend to ignore. Among the most naive are the politicians who undertake cuts and their senior civil service facilitators. What is that framework? I am writing here about the relationship between the individual and the state. We all have one although most rarely see life in these terms.

It would be wrong for me to try to define that relationship in the case of those who are self-employed or employed in the private sector. However, they rarely give the impression that they feel it is an equal partnership. By contrast, public sector workers are more closely wedded to the state. The psychology is completely different. Being bound by an employment contract with Government is not at all the same as an employment contract with a private company or a business arrangement between individuals. To take the latter cases first, there may be strong bonds. Loss of employment or business there can be a huge blow. The Government's policies might even be blamed but the nature of the relationship between that individual and the state doesn't fundamentally change. If anything, the cynicism and sense of distance are reinforced if a job is lost at Tesco or the O2.

This is not to say that the relationship will necessarily be viewed negatively. There are huge numbers who accept throughout their lives that this is how a country is generally. That is, it is always a little remote from individual interests. It could always be run better. In their view, neither of these is a reason not to fly the national flag. But public sector workers are more than just a component of the state. They are a component of the Government in employment terms. When HMG cuts staff, she severs the most fundamental ties between the departing employee and the state as that has been perceived. What this means is that she chooses to create enemies of the system in a way that, say, a supermarket could never do. Any flag for the country that is carried inside a public sector employee is torn to shreds by the action of cutting. That isn't chosen. Quite reluctantly it is the impact because that is how human psychology works. I say the next entirely benignly. People underestimate that impact at their peril.

So then onto the future. Our self-employed and private sector people expect those ex public sector workers to find jobs. After all, they are now in the same boat as them and about time too. Except they are not in the same boat. An adult lifetime of having a closer relationship with Government is such that the personality will not change overnight into accommodating a private sector full of swingers. It just isn't possible. While HMG is supported by the former for getting tougher on the newly unemployed public sector worker, the worker himself sees it, and indeed feels it, differently. HMG becomes a fickle mistress who wants someone to be unemployed on one week and then employed the very next. To be on the end of it feels nothing less than to be the victim of disturbing mind games. This in itself weakens the resolve to be re-employed because it is a form of bullying not easily overcome.

As always, the bully cannot see it in that way. It is quite unable, or perhaps unwilling, to view it as anything other than a problem with the individual. But, in fact, the more dogmatic the requirement of Government and its supporters for such people to become employed again, the more there is resistance. One might just find the will to try all over again for oneself but the heavy boot of the country leads instinctively to an instinct of refusal, whether one wants that or not. I have said before on this forum that if anyone doubts this argument, I would currently choose starvation rather than doing something under force although fortunately I am not in that position yet. This was never my natural way. I had a strong work ethic. Not any more because the Government has done me in. If I can't work in a country that has treated me well, I can't work at all. Psychologically, I am quite unable to go there.

A footnote on taxation. Ordinary public sector workers pay their full taxes throughout their working lives. I have been shaken to the core during the past year on hearing how rife tax avoidance is even in what one might call the basic private sector. Lawful it might be but it increasingly seems to me that ex public sector workers who claim benefits - and I am not one who does - are essentially claiming money that they themselves have paid in. In the old days, I might have felt that all should be under some sort of moral pressure to get on a bike, however difficult, and have gone along with statements to that effect from private sector people, whether conservative or livingstonian. This doesn't apply now. As they themselves recognise, money tends to be the ultimate lever for driving others in a favoured direction. The less they contribute financially to the wider country, the more impotent they seem.

[ahinton]

I won't quote you here for the sake of saving space. Lots of very interesting thoughts here. A few comments on these.

Whilst I take your point that, under the vastly simplified tax system that I suggested and which requires only a small proportion of the current number of HMRC/DWP employees to manage, employers' NIC would be abolished so, with the tax on jobs removed at a stroke, the prospect that more employers could afford to take on more employees is a very real one, so it might not be anything like as hard for redundant HMRC/DWP employees to find new work. That said, I was not suggesting, as you seem to imply, that government would somehow "insist" that their redundant staff MUST find alternative work immediately; they would have neither the right nor the ability to do that! What I do say about this, however, is that the tax on jobs that has for some time been cemented into our society is a destructive insult to employers and employees alike and has always been damaging to the economy.

But to move on to the substance of your post, which is the relationshbip between the individual and the state with special emphasis on the phenomenon of employment - this relationship is not as clear cut as I think you might seek to portray. The "jobs for life" notion went out years ago and, as a consequence, the idea that any person might work always only in the public sector or always only in the private sector has been undermined; there is nowadays a far greater movement between public and private sector employment for far more people than was once the case. What's perhaps even more important is that government workers are, even today, still called "civil servants" and, irrespective of how "civil" some of them might be, they are "servants" in a sense; I don't mean to imply "servility" in the way in which that is generally understood, but servants of the state which is, in turn, a servant of the people - and it is this latter factor that should not be forgotten. Do public sector workers see themselves as serving the public or serving themsevles with a salary for doing a job just like private sector employees? These days, in such difficult economic times when even those in full-time work are struggling to make ends meet, I suspect it's far more the latter than the former.

The relationship that you mention is also far less consistent because levels of self-chosen self-employment are now greater than once they were; it is also in an increasing state of flux when government gets larger or smaller, which it often does, the sheer size of the state creating its own fallout each time it decreases - but who decided that it should increase in size beforehand, thereby making the problems arising from its future shrinkage all the greater? Consider also those who work in both the private and the public sector - doctors and medical consultants, for example, but there are many others; how might their relationships with the state be different to those who work, at any one time, firmly in the public or private sectors only? Cuts? These are surely as damaging wherever they may fall - and, in government terms, cutbacks of staff follow increases in staff levels, so should not be regarded somehow in isolation, as though government has some kind of inbuilt obligation always only to increase the numbers of its staff and never to decrease them; after all, the taxpayer has to fund their salaries and other costs.

In any case, I'm not so sure that many public sector employees any longer regard their public sector employment status as being much different from that of their private sector colleagues; a job's a job and some people on both sides of the fence are simply glad to have one, especially if that job seems to have perceived prospects. Do many public sector employees really consider that they have some kind of superior - or, at the very least, stronger - relationship with government than private sector employees, those who work in both sectors simultaneously, those who are self-employed or those who are unemployed, non-employed or retired? If ever any of them did, I suspect that far fewer of them do now - which is surely no bad thing at a time when the state of flux in every part of the workplace, public and private, continues to be on the increase. Someone that I know whose first job after graduating was with DWP was told, on joining that organisation, that she had a job / job prospects for life there if she so wished; she told me that she didn't believe it, which was as well when she was made redundant after less than two years. She now has part-time employment with another government agency as well as part-time consultancy work within the private sector and has since also started her own business, on which basis some might assume that she's running three different relationships with the state simultaneously!

As to your last paragraph, "ordinary public sector workers" are, for the most part, taxed no differently to "ordinary private sector workers", although there's no shortage of moonlighting by both becauase neither can be certain to be able to manage on their salaries within either sector alone; tax avoidance is therefore evidenced across the board, with public sector workers not exempted from involvement in it or shielded from it. I also imagine that a certain amount of tax avoidance within HMRC probably exists; the old cliché "if you want to know the time, ask a policeman" has surely long since been replaced by "if you want to know how to avoid tax, ask a tax inspector"...

[Lateralthinking1]

Well, I am in a privileged position here ahinton for having both a degree which is little different from that of many senior civil servants and a background of having been employed at the grade of an average worker. In fact, my salary was rather less than the average in London. If nothing else, this gives me certain insights into all parts of the spectrum. The contrast also directly reflects a wide divergence in the social environments of my upbringing and is therefore deeply rooted in aspects of my identity. I am far from unique in that way but it is inevitable that I will see arguments as being produced from starker angles. To this can be added a father who was on a similar grade in local government which did provide him with a job for life. I saw the benefits.

I can also see what you are saying. Your contribution largely signals how our employment systems are currently structured. In the examples you cite, there is a fluidity that I recognise. Mainly it is evident in those aged under 40 but it also exists in senior managers above that age. Their networking leads to wide open doors of employment across the sectors. In the more humdrum world, this is not the case for those over 40. We are the white collar equivalent to the miners of nearly 30 years ago. Communities won't crash around us in the same way. Commuterland is geographically wide and anonymous. The same crash is there but it is largely invisible except to GPs. That is why it has been so easy for politicians and the public to dismiss so lightly.

If sexual intercourse began for Philip Larkin in 1963, the notion - rather actuality - of jobs for life ended in my head late in 2009. The situation you describe of an earlier demise was never one fully accepted on the inside. I am sure that this was for reasons of self-interest insofar as work for pay is in anyone's interest. It was also based on the presentation given by our employer in the mid 1980s and the situation as it was at the end of Major's Government. Beyond those things, when one comes from a background with diverse social and environmental elements, life is interesting but perhaps a little more difficult to hold personally together. There is therefore an especial attraction to the kind of organisational systems that offer a sense of permanence and coherence.

Currently, what I see is a society - let's describe this as the interactive framework for living - that is rather like a scatterbrained drunk. It is so contradictory. Fundamental changes to personal relationships in the 1960s were needed but they have led to destabilising norms of frequent dalliance. It is no coincidence that the structure of employment has been allowed to go the same way. Most still believe that the ideal personal situation is long-term partnerships. Those have survived. Children are supported for nearly 25 years. That is the same length of time as the average mortgage which, however elusive these days, often remains a primary objective. So it is the new structure of employment that is out-of-kilter. It is the perfect design for a teenager sleeping around a bit in a bedsit. I thought that economies matured. Ours has gone in the opposite direction and isn't fit for adult purpose.

There are hints in your contribution of feelings in the public sector of superiority. I have seen this in the Civil Service on many occasions. Predictably it is less prevalent among the lower grades. The vast majority of Civil Servants are on average or lower than average salaries, whatever the Daily Mail might say. I was always aware of our public service role. In that sense, I was very proud to be called a servant. It wasn't servile. Even senior, older style managers, now retired, often knew instinctively what was required of them and handed down that ethos by way of example. The new public sector has been encouraged to adopt methods that frequently run counter to that more attentive and communicative approach. Most haven't adapted. They know nothing else.

Either way, what I describe should not be interpreted as having felt in the slightest above others. My relationship with the public was always where possible an equal two-way street. But the relationship between a public sector worker and the Government is different. To be employed to represent the Government is not the same as working in a private role directly or indirectly with or around the Government. As a consequence there is a different relationship with country. A nationalistic chap who ventures with the military into Afghanistan will return a different person in regard to the flag if he has had his legs blown off because of inadequate equipment. The same guy will go through the same personal trauma if he loses his legs because of very poor health and safety enforcement in his private company except in relation to country. The nationalism in him will remain intact.

[aka Calum Da Jazbo]

...the rich etc

[Dave2002]

Assuming your p[oint to be that government sponsored tax avoidance is OK but other tax avoidance is not, here's an example. A man purchases a piece of antique furniture for £10,000; he later discovers its sale value to be in excess of four times what he paid for it. He then puts it into the joint names of himself and his wife and then sells it on March 31 for £43,000 with half paid up front and the rest a week later. How much capital gains tax does he pay? It's called tax avoidance and, in this instance, is government sponsored, but I wonder if you'd consider that example moral or immoral?

Is this real? Could be fantasy, as it's also rather likely that the man won't actually be able to sell for more then £10k, and even if he does the markup you suggest is rather a good one. Suppose he actually sells for £15k. There'll be transport and auctioner's fees etc., so it's quite possible that he won't make much anyway. If he keeps the furniture for a while it's likely that insurers will value it highly, and take their not insubstantial cut. If your example is real, then someone was lucky. Otherwise I'd suggest that most trying to make money this way, and at the same time dodge some of the tax will actually lose rather than gain. If the gain is above around £8k there is the technical issue of CGT, and the morality question is something else!

[ahinton]

There are hints in your contribution of feelings in the public sector of superiority. I have seen this in the Civil Service on many occasions. Predictably it is less prevalent among the lower grades. The vast majority of Civil Servants are on average or lower than average salaries, whatever the Daily Mail might say. I was always aware of our public service role. In that sense, I was very proud to be called a servant. It wasn't servile. Even senior, older style managers, now retired, often knew instinctively what was required of them and handed down that ethos by way of example. The new public sector has been encouraged to adopt methods that frequently run counter to that more attentive and communicative approach. Most haven't adapted. They know nothing else.

There are no such hints - or at least none were intended; indeed, I was trying to suggest the opposite! I do not believe that, these days, there's any senseof superiority among public sector workers by virtue of their being servants of the state.

Anyway, much else of interest here; thanks for your considerd post.

Either way, what I describe should not be interpreted as having felt in the slightest above others. My relationship with the public was always where possible an equal two-way street. But the relationship between a public sector worker and the Government is different. To be employed to represent the Government is not the same as working in a private role directly or indirectly with or around the Government. As a consequence there is a different relationship with country. A nationalistic chap who ventures with the military into Afghanistan will return a different person in regard to the flag if he has had his legs blown off because of inadequate equipment. The same guy will go through the same personal trauma if he loses his legs because of very poor health and safety enforcement in his private company except in relation to country. The nationalism in him will remain intact.[/QUOTE]

[Dave2002]

I have been fortunate to date in not requiring much from the state health service, but I do maintain a private health insurance policy as well just in case and have used it on occasion; I don't believe that the state can, or can reasonably be expected to, provide all healthcare for all at all times, funded by the taxpayer, because the demands upon the health service increase by the second and taxpayers simply could not possibly afford to fund it completely.

Why ever shouldn't we expect a high quality health system funded nationally out of taxes?

One problem as I see it is that there is a real government funding deficit. Revenue is lower than outgoings (so, I hate to write this, Osborne and Cameron are right) yet politicians always offer to lower taxes, and it seems that in our society hardly anyone votes to increase them, which would go a substantial way to solving the problems. Although O and C are right about the deficit, they appear to not actually be taking the "tough decisions" which might be necessary to remedy the situation. It seems to be a case of business as usual and denial all round, at least for the present. If any tough decisions have been made, it is possible that these have been applied unfairly.