A couple of Ritchie\’s nuggets

The reality is that tax is paid by consent in the United Kingdom. This may not appear to be
the case for those in employment with limited investment income, but for those who are self
employed or who run companies the relatively high rate of compliance with tax law is the
consequence of voluntary disclosure to HMRC since the resources it has available to pursue
those not willing to pay are very limited. This rate of voluntary compliance is dependent
upon widespread acceptance of the tax system being, despite all complaints made, broadly
equitable.
When additional revenue is being demanded the obligation upon political parties of all
hues to close loopholes exploited by those avoiding tax will be high since the existence of
persistent tax avoidance, especially when undertaken by major corporations and those with
significant earnings, will undermine the widespread perception of tax justice that exists at
present.

There\’s some logic missing there really. To put his suggestion simply.

The poor and low earners don\’t have much opportunity to dodge tax. The rich do and we don\’t have enough taxmen to stop them. Thus we should crack down more heavily upon the rich because we rely on them voluntarily cooperating with the tax system……

Eh?

The UK’s domicile rule should be abolished as a first step towards simplifying the UK’s
overly complex rules on personal tax residence.

Shrug, whatever. But it\’s going to make this more difficult:

Any such rule must also include
significant anti-avoidance rules so that those leaving the UK to live in a location with low
or no taxes and no history of tax cooperation with the UK should face considerably higher
obstacles before being considered non-resident than do those leaving for locations such as
other EU countries.

Because of course tax domicile also applies to those who leave as well as to those who come. To skip inheritance tax for example you\’ve got to be non-dom, not just not-resident. I\’ve seen no sign anywhere that Ritchie has even considered this point.

There should be reform of the rules on company residence so that the artificial relocation
of a company’s place of management and control in an effort to escape the UK tax net
becomes considerably harder to achieve.

Sorry mate, simply not in the powers of the UK Government. That\’s EU law that is, free movement of people, goods and capital. And yes, companies count as people here (they being \”legal persons\” you see?). Brussels defines this, not Westminster.

Radically reform the way in which small companies are taxed to both simplify current
arrangements and prevent abuse – this would require the income of such companies to
be treated as belonging to their shareholders unless those shareholders are not resident
in the UK, so preventing tax deferral by use of corporate structures.

Fascinating. He regularly rants that Jersey is a nest of vipers for doing exactly this.

Introduce an additional tax charge on investment income above a set limit so that
it is taxed at rates similar to those applied to earned income when national insurance
is taken into account to reduce the incentive to shift income between partners in a
relationship and to create fairness between those living on earned and unearned income,
which does not exist at present.

Oh dear. Seems to have forgotten that national insurance is, well, national insurance. You pay in to get stuff out. Like unemployment pay, pensions, just to give two examples. If you\’re self employed then you pay lower NI…..and you also get a lot less help when the work dries up. If you live on investment income you don\’t pay NI at all. But then nor do you get unemployment pay nor a State pension.

Y\’see, he\’s forgotten that if people pay their insurance premiums then they\’re supposed to get the insurance that premiums buy.

His final lines:

It is not possible at this juncture to quantify precisely the benefit that would result from
this programme of tax reform. It is reasonable to expect the benefit to considerably exceed
£10bn per annum.

Oh aye? Yet another figure plucked entirely from the air then. No doubt by the next report from Mr. Murphy this will have morphed into a fixed and exact figure, for, you see, he\’s a habit of making unsubstantiated assumptions in report n+1 into solid facts in report n+2. By referring back to report n+1 of course. See, there \’s a reference!

Typical Murphy nonsense and sadly the peeps at the TUC are stupid enough not to realise it.

12 comments on “A couple of Ritchie\’s nuggets

  1. “The reality is that tax is paid by consent in the United Kingdom.”

    No it bleeding well isn’t. If tax was paid by consent, I’d pay the government the sum they are worth (a bent farthing; keep the change).

  2. More to add to the canon of Ritchie drivel. His continued lack of understanding of domicile, one of the world’s oldest private law concepts, remains contemptible.

    But, HMRC has limited resources ? HMRC has an annual budget of £4BN, of which some £1.5BN is allocated to its investigatory function. By what measure is £1BN plus considered limited ?

  3. Brian. Damned right.

    I declare my income honestly, not because I think government is ‘worth it’ but because I fear the consequences of investigation and incarceration.

  4. Too much on Murphy,already.As women say when things get violent( instead of holding you back as you desparately want) “He’s just not worth it”
    He’s right about tax havens though but wrong in not supporting land value tax which is the unavoidable levy.

  5. Murphy’s approach to the domicile rule is a source of amusement (it used to be irritation until I realized the guy is a buffoon and should be taken exclusively for entertainment value)

    He opposes the rule on the basis that it causes “huge” inequalities, but in the same breath admits that he has no evidence or analysis to back this up (or anything else on the issue), just the sound of his own rants.

    I guess that when he named his site tax RESEARCH, he never thought people would actually ask him to produce, well, research.

  6. “This rate of voluntary compliance is dependent
    upon widespread acceptance of the tax system being, despite all complaints made, broadly
    equitable.”

    Bullshit, compliance is dependent upon value for money. If people feel the government spends money wisely they don’t mind paying it.

  7. Murphy still does not get what some American baseball player knew:

    “In theory, there is no difference between theory and practice. In practice, there is.”
    – Yogi Berra

  8. Murphy is regarded as a joke in the accountancy profession. His understand of basic concepts of law, economics, property rights etc is shockingly bad.

    For the first and possibly last time, I agree with DBC Reed that it is probably not worth banging on about Murphy, who ought to be sectioned.

  9. sorry, I think we need to bang on about Murphy – he is dangerous – very good @ self-promotion.- popped up recently on TV in a programme on pornography as a ‘forensic accountant’ !! He needs to be constantly shown up , castigated and ridiculed.

  10. “sorry, I think we need to bang on about Murphy – he is dangerous – very good @ self-promotion.- popped up recently on TV in a programme on pornography as a ‘forensic accountant’ !!”

    C4 seem to declare him as being in receipt of the TUC’s shilling. The BBC don’t.

  11. I read this far …

    “There should be reform of the rules on company residence so that the artificial relocation
    of a company’s place of management and control in an effort to escape the UK tax net becomes considerably harder to achieve.”

    … and had to stop. This is what I do for a living, and I know more about this than most people.

    He cheerfully overlooks (as do most people) that trading and rental income is taxed at source. The profits of a UK Tesco store (to take one business at random) will always be taxable in the UK. The Board of Directors of Tesco plc could all bunk off to Jersey and the company would then become non-UK resident, but so what?

    It would still pay the same amount of corporation tax on the profits made in its UK stores (and the VAT, PAYE or Business Rates it pays would not be affected one jot).

    The chances are, Tesco would then also suffer an ‘exit charge’ i.e. HMRC would work out the latent capital gains on assets which in future would no longer be taxable in the UK (and Tesco presumably has relatively few such assets) and Tesco would have to pay tax as if it had sold them for market value.

    When the holding companies of Shire Pharma and so on relocate, this is a much more subtle (and relatively unimportant) little tax saving, which might be worth Shire’s while but hardly of great interest to HM Treasury, and only worth doing if the majority of their shareholders are non-UK anyway.

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