Posts Tagged ‘tax avoidance’

John Mills, tax and dishonesty

07/06/2013, 08:41:55 AM

by Dan McCurry

On the issue of taxation abuse, we need to move on from the oversimplified distinction between legal avoidance and illegal evasion.

At the moment some avoidance has shocked people, while other avoidance, such as my tax free savings, is not an abuse. In order to sort out the difference between good and bad avoidance, I suggest people concern themselves with whether the avoidance was dishonest or not.

In the case of George Osborne’s complaint about a Labour donation, we need to ask, was John Mills dishonest in his method of avoiding tax in this donation? If he was, then Labour is in trouble, if he wasn’t then we are not. Mr Mills chose not to sell the £1.5m of shares and give the cash to Labour, as that would have been taxed as a capital gain. By giving Labour the shares, then Labour will be taxed on the dividends, but only liable to the capital gains if they are sold.

I have some of my savings in an ISA as a tax efficient method of building a pension. I can invest £11,250 per year in my ISA and this will be exempt from taxation both on the dividends and on the capital gains. The same applies to a donation I might give to charity that can be given with “Gift Aid” so that the tax paid amount is passed on to the charity. Is that dishonest? No.

This is quite different from the case of Jimmy Carr who passed his money to an Isle of Man, company who then provided him with same amount back but called it a loan. A loan isn’t taxable, so he avoided tax. Now, any sensible person would describe that as completely dishonest, but because tax law is based on a set of rules, he wasn’t prosecuted.

Criminal law is a different set of law and can take precedence if policy makers wish it to. If the authorities wished to prosecute him for fraud, they could have done so, but if they had, then they would probably have to prosecute everyone else who has done similar, and that is a prospect that can be frightening to the people who run this country.

Fraud is when someone commits a dishonest act which makes a gain for himself, or a loss to another.

The other problem that exists with tax is that countries tend to have bilateral treaties with each other.


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Where is the tax justice in our economy?

10/12/2012, 01:28:03 PM

by Amanda Ramsay

When it comes to the economy, George Osborne has failed this country on all levels. He’s failed on debt reduction, on deficit reduction and failed to bring growth or jobs. The price we pay is cuts to our services, employment rights and employment prospects.

The Autumn financial statement poured more cold water on Keynesian hopes, eager for a “do something government,” not a laissez-faire-do-nothing-but-cut-government. Yet in the morass of commentary and analysis since the chancellor sat down last Wednesday, I am still asking myself: why is it acceptable that tax payers end-up subsidising low wages by means of tax credits, housing benefit and all manner of other fiscal instruments to supplement people on poverty pay?

I ask this not because the recipients don’t deserve the help they need to make ends meet, of course they do, but they are only necessary because employers and companies are not paying adequate salaries and wages in the first place.

Someone who has the gumption to start a company and create jobs should be congratulated and supported but without a mandatory living wage, companies are allowed to let profit win over decency in how they pay their staff.

Low pay is forcing people into the arms of the nanny state; to house, feed, clothe and pay for transport to get themselves to work, let alone heat their homes.

Where’s the fairness in that?


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The Sunday review: Starbucks

09/12/2012, 08:00:58 AM

by Anthony Painter

I imagine the first Starbucks store that opened in Pike Place market in Seattle was quite an exciting affair. The coffee was probably great. It must have been a remarkable local institution. Four decades later, Starbucks is now synonymous with corporate greed. What a few weeks it’s had – a long way from Pike Place.

What has taken place shows that direct action works. No, not UK Uncut. But that of MPs. Step forward Margaret Hodge, a name mostly associated with New Labour. Who’d have thought it? But when a special report appeared on Reuters in the middle of October, it was the House of Commons public accounts committee that reacted. A few weeks later and Starbucks is £20 million out of pocket. Investigative journalism and a backbench House of Commons committee – it doesn’t get much more old politics than that but it did the trick.

Starbucks seem pretty par for the course when it comes to multinational tax avoidance. In this case, moral outrage seems to have done the trick as thousands turned away from Starbucks, helped by campaigns such as 38 Degrees (UK Uncut have a habit of putting people off rather than encouraging them to join their campaigns – whatever the claims of the direct action left or paranoid right). But moral outrage only goes so far. Starbucks will be hoping it’s all died down in a couple of years and then get back to business as usual.


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Forcing the likes of Starbucks to Pay Where You Earn would help tackle tax avoidance

22/10/2012, 04:23:50 PM

Last week Phil McCauley won the “top of the policies” vote at Pragmatic Radicalism’s event on industrial policy. The winning proposal tackled the question of reducing corporate tax avoidance

I believe we must act to end tax avoidance. We have seen numerous examples of famous brands proudly paying very little tax; just last week it emerged that Starbucks have a grand total of £8.6m in corporation tax in this country over the last fourteen years.

Once again, as the spotlight has been shone on an embarrassed corporation, we’ve seen a litany of familiar excuses wheeled out to excuse not paying their fair share. This time, as well as the usual “we’ve done nothing illegal” line, part of Starbucks defence was that they paid their fair share of tax via national insurance contributions for their employees! This assumes away the entire basis of corporation tax (e.g. on companies’ profits) and sells every other tax payer short – company and individual alike.

Starbucks disgraceful tax avoidance will not be the last revelation of this type, and unless action is taken, we will continue see yet more billionaire entrepreneurs seeking plaudits whilst legally robbing the exchequer.

For years, all governments have failed to rebalance our taxation system. My proposal involves a new approach that requires legislation from the next Labour government and which represents a radical shift away from the failed approaches of the past.

It’s time for pay where you earn.


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Labour needs to stop moralising about tax

02/08/2012, 07:00:40 AM

by Peter Watt

Is paying tax a moral duty?  It is the sort of question that has those on the left and right frothing at the mouth.

The question has recently come to the fore once again with row after row over tax avoidance by some of the rich and famous.  On the face of it the case is obvious.

At a time when budgets are being squeezed and services cut there are people who are really suffering.  Jobs are going and much valued support services to some of our most vulnerable are being cut so that we can reduce the amount we are borrowing as a country.

We all need to do our bit by paying our taxes and if you choose to deliberately avoid paying yours then what does that make you?  Selfish?  Unfair?  That’s certainly the common view; and with George Osborne and Ed balls united in a desire to clamp down on such “aggressive” schemes it seems that there is a degree of consensus; paying tax is our moral duty.

But, on the other hand I have an ISA that means that I don’t have to pay tax on any interest I accrue.  I take advantage of duty free (tax free) shopping when I travel abroad.  I took advice on planning my pension and made sure that my arrangements were tax efficient.  And I am hardly alone, millions of people do it.  If you have to undertake a self-assessment then you don’t start the process trying to maximise what you have to pay you look to minimise it.

It may not be in the same league as the Jersey based K2 scheme made famous by Jimmy Carr, but it is still tax avoidance.

And companies rightly look to make tax-efficient investment decisions.  Their duty is to maximise returns for shareholders and part of that is to legally minimise the tax that they have to pay.  Paying less tax means that they can maximise reinvestment in innovation and jobs; which will in turn generate more tax.

Bigger profits mean better returns for shareholders, many of whom are millions of people with savings and pensions schemes.

When the Labour party bought a London property a few years ago, it used a company to buy it.  The party did that so that when they sold the property it would be more tax efficient and indeed, when it was sold it saved tens of thousands of pounds as a result.  Quite right too!


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Livingstone NIC-ed on tax avoidance

06/04/2012, 08:04:03 AM

by Atul Hatwal

The hand to hand combat of a mayoral campaign is hardly the ideal environment for sober reflection, but for the Labour party, it’s time to have a long hard think.

After yesterday’s partial release of the mayoral contenders’ tax and earnings details, there is now a threat that Ken Livingstone will not just lose the London election, but will seriously damage the national party in the process.

The full nature of this danger is not quite apparent yet. The media focus over the last 24hours has been on examining the total tax paid by each of the candidates, looking at who paid the most. This is understandable but misses the point.

The issue is not about the absolute amounts handed over to HMRC, but whether these figures demonstrate that the candidates have, or have not, lived up to their rhetoric.

It’s about trust, not finance and for one of Labour’s most high profile figures, who has volubly railed against tax avoidance, the figures are damning.

In 2010/11, setting aside pension contributions, Ken Livingstone received 92% of his income – £63,333 – through dividends and just 8% or £5,700 through a normal salary where tax was deducted on a pay as you earn (PAYE) basis.

This approach is a standard and perfectly legal way of drawing down money from a company and is used by hundreds of thousands of people for one simple reason: it avoids national insurance contributions (NICs).

Dividends are not liable for NICs, so being paid principally through dividends reduces or completely removes NICs payments.

In 2010/11 the threshold to start paying NICs was £5,720 per year and as if by magic, Ken Livingstone’s PAYE income for the year was £20 below the level where any NICs would have to be paid.

Fancy that.

The only reason £5,700 was paid as PAYE income at all is that that there needs to be a  level of PAYE earnings each year above a minimum threshold (£5,044 in 2010/11) to  build eligibility for certain benefits. For example, the state pension, for which Ken Livingstone qualified, during 2010/11.

Again, to be clear, this is not tax evasion, and it’s certainly not illegal, but avoiding NICs is tax avoidance for most voters.


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Devil in detail part 9: inheritance tax cut for the super-rich

14/12/2010, 01:02:06 PM

by Neil Lovatt

Under new government proposals published last week, it will now be possible for the super rich to use their pension assets to avoid inheritance tax. The requirement for pension assets to be paid out within a person’s lifetime is removed in the new arrangements. But pension assets sit outside the IHT regime. Thus by leaving substantial assets in their pensions at death, the very wealthy will henceforth be able to avoid enormous amounts of inheritance tax.

The full set of the government’s proposed pension changes is here, and they are unlikely to be read by anyone other than the odd policy wonk, such as myself, or a specialist journalist with a readership of a few hundred. It’s hardly front page news, but it should be.

The problem with pensions is their inflexibility. The tabloid media waste no time in stoking the flames of hate over pension rules restricting access to your money. (more…)

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