Oh dear

Alex Andreou takes Toby Young to task over the details of taxation. Then lets slip this nonsense:

His position also conveniently assumes that these members of the haute monde do not have access to talented accountants, umbrella companies, offshore trusts, wives in Monaco, creative avoidance schemes or any income that comes from dividends.

Erm, income from dividends doesn\’t produce a lower tax rate, sorry, but it doesn\’t. The system is set up so that the company takes a slice off the dividend payment and sends it to the Treasury. Then the individual, if they\’re in a higher tax band, must send more. It doesn\’t end up entirely and exactly the same as the taxation of regular income, but the system is most certainly trying to make the income tax paid roughly the same.

We\’ll have to call this Ritchie\’s Law. Muphry\’s Law is that any correction of typos or grammar will contain one or more spolling of grammer mistakes worse than those being complained of. Ritchie\’s Law is the corollary that applies to taxation.

As with, of course, that famous moment when Ritchie decided to correct the calculation of dividend taxation and got it wrong.

10 comments on “Oh dear

  1. Looks like Andreou is trying to out-idiot Jones and Penny. I’m worried they might be oversaturating the market now.

  2. Alex Andreou certainly screwed up with his ignorance about dividends.

    However Toby Young’s article was even worse with his confusion between the amount the rich pay in income tax and the amount they pay of all taxes. Toby seemed unaware that taxes like Nat Insurance exist.

  3. He also seems a bit rubbish at stylistic erudition: monde is masculine, haute is feminine – so he can’t manage agreement at that level either.

  4. It really depends where you live and what the purpose of the company is.

    e.g. in the USA dividends are taxed at headline zero. However headline corporation tax is at 40%. However, American accounting standards let you choose between lifo-fifo (this makes a huge difference) and a good company accoutnant can maximise the deductbales. Accordingly, for some people, setting up a company to pay tax on the 40% profit does make more sense than running your affairs as an individual paying income tax on net income. For many others it doesn’t.

    The point here is that in order to tax companies “appropriately” according to the principles in the article, the government has to have different tax rates for different “classes” of company, defined presumably by the scope of their operations. This exists in the UK where oil corporations have faced a tax surcharge since Brown.

    I very much doubt the ability of the tax office to classify correctly all the many small companies that are owned by the deliberately ill-defined “members of the haute monde”. There would be arbitrary decisions made and legal complications would arise.

    I much prefer the idea of abolishing corporation tax altogether. I think that this gap between the treatment of corporations and individuals is starting to look a bit pointless, where in the UK the top rate of tax is 45% + NI, while if put through a service company (cost £20 plus mailbox services?) the tax rate after all legal deductables is approaching 22%. At this rate, people earning far below the top rate of tax as income have strong incentives to incorporate.

  5. wives in Monaco

    Why do people assume that foreign-based wives are the preserve of the rich? A cursory wander through any neon-lit street in Thailand demonstrates that obtaining a wife exempt from UK taxation is remarkably easy, even if you are fat knacker with a slaphead and grey pony-tail.

    Nor is it particularly expensive or difficult to shift a British wife off to live in Thailand, where she will be exempt from UK taxation.

    I think the real beef most people have about the Greens is that he is not only rich, but has a wife who he trusts.

  6. @Tim Newman ‘I think the real beef most people have about the Greens is that he is not only rich, but has a wife who he trusts.’

    While I know what you mean, Tim, I think this is to fight the wrong battle; he doesn’t own the company, she does. This cannot be stated enough.

    It’s highly ironic that those supposed guardians of the feminist flame on the left simply refuse to admit that a woman can control a company.

    He works for her, basically.

  7. @Interested – as a corollary, I heard a story a while about a FTSE100 CEO (not going to name names in case it’s wrong and libellous) who optimised the family tax position by gifting to his wife all of his sizeable shareholding. Couple of months later she divorced him and kept the lot, and there was nothing he could do about it.

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