Elsewhere

The world faces one of those unfathomable mysteries. Any number of charities, campaign fronts and political groupuscules adamantly insist that corporations and the rich are dodging their rightfully due taxes. They propose measures which would lead to that cash being recovered and then comes the mystery. The money that is collected never amounts to a hill of beans compared to the original claims. How and why could that be?

One answer is that all are in this together, the politicians and even the tax collecting bureaucrats are in cahoots with the plutocrats. No, some really do make this argument. A rather more sensible revelation would be that the original claims are so vastly overblown as to be nonsense – that is why no one is ever able to collect the sort of sums alleged to be being hidden away.

The particular trigger for this musing is that Her Majesty’s Revenue and Customs (the U.K.’s version of the Inland Revenue Service) has only been able to collect, following various law and reporting changes, one third of what campaigners insisted would be forthcoming subsequent to those changes. There have been mutterings of a lack of will, insufficient taxmen and resources for them to work with and so on. Again, good sense insists that we look to a different reason. HMRC itself has always said that the tax gap – the difference between what is due and what is paid – is about one third what the campaigners themselves say it is. The gap is one third, collections are one third, really, it is not all that complex an explanation.

13 comments on “Elsewhere

  1. Pressure from various lobbies has resulted in the police giving up their actual job. They have been intimidated into backing down and imposing an essentially two-tiered legal system on Britain.

    Intimidated so much that in fact the police lead the judicial railroading of a couple of unpleasant thugs for the murder of Stephen Lawrence. Even though there is no evidence against them.

    This is all just the government co-operating with the “N”GOs in order to intimidate the civil service until they start randomly handing out large tax bills regardless of what is owed. After all, the government needs money. It is just an attempt to impose an extra-judicial shake down.

  2. Didn’t know you were writing for the CFR too. New gig?

    Good article. Going back and looking at actual v predicted revenues is something I occasionally think of doing, but haven’t yet summoned up the energy for.

    Being pedantic (as is traditional on this blog) – you describe HMRC as “the U.K.’s version of the Inland Revenue Service” – assuming you mean the US one (Cayman doesn’t have one, just Customs), it’s actually Internal, not Inland.

  3. The other point with the Swiss example is that at the time of the bank thingy the interest rate on the CHF was appalling, and investments weren’t doing much either.

    Although a friend’s 10-year-old kid did get caught up in it – there were a few hundred CHF for him in a Swiss post office account, and since they didn’t provide evidence that all tax due was paid (it earned no interest so no tax was due, and he was 10 years old so wasn’t paying tax anyway) HMRC took a third of it. Since the “anonymous penalty” was… erm… anonymous, they couldn’t get it back, either.

  4. In fact, given that the Inland Revenue was formed in 1849 and the IRS in 1862, it would be better to say that the IRS is America’s equivalent of HMRC, not the other way round.

  5. And you could have mentioned IR35 as a classic example, Tim.

    This anti-avoidance legislation aimed at countering so-called “disguised employment” was predicted when introduced in 1999 to bring in £300m a year in additional tax and national insurance. Between 2002 and 2007 it actually raised less than £1.5m a year. By 2011 the yield from IR35 enquiries had fallen to just over £200k.

    But I bet they’d already spent the £300m a year they were expecting.

  6. ‘Any number of charities, campaign fronts and political groupuscules adamantly insist that corporations and the rich are dodging their rightfully due taxes.’

    One must first assume it is about taxes.

  7. “was predicted when introduced in 1999 to bring in £300m a year in additional tax and national insurance. Between 2002 and 2007 it actually raised less than £1.5m a year.”

    Could this simply have appeared in other ways, e.g. through completely ordinary PAYE and NI (which would have been an entirely unnoticeable rouding error) rather than neatly marked as IR35?

    People just stopped paying their wife, dog, children etc dividends

  8. @The Pedant-General

    No. No client of mine stopped paying dividends nor was I aware of anyone that did.

    Any tax advisor worth his fees would be capable of creating a contract that took a relationship outside any challenge to employee/employer – and that’s because most of the relationships WERE outside employee/employer.

    HMRC fought a few cases, lost most of them in the courts and basically gave up.

    IR35 was a politicians’ attempt to solve a problem that politicians had decided was a problem.

    If it was up to me and if I thought there really was a problem, I’d have put an extra tax on dividends paid by close companies.

  9. @Andrew C, April 24, 2018 at 1:35 pm

    And you could have mentioned IR35 as a classic example, Tim.

    This anti-avoidance legislation aimed at countering so-called “disguised employment” was predicted when introduced in 1999 to bring in £300m a year in additional tax and national insurance. Between 2002 and 2007 it actually raised less than £1.5m a year. By 2011 the yield from IR35 enquiries had fallen to just over £200k.

    IR35 should be abolished, the costs to HMRC must exceed tax raised. Then there’s the cost of all the jumping through hoops for contractors.

    It was nothing more than a Brown make-work scheme for more Gov’t employees and a spiteful attack on self-employed.

  10. Government makes policy that causes change in behaviour.
    The change in behaviour causes some people to think government is losing tax income.
    They persuade government to change or add laws to claw back that tax income.
    Causing again a change in behaviour.

    Universal credit will support a new self employed person for 12 months, though with less support than an employee would get. After 12 months universal credit will treat the self employed person as earning minimum wage for the hours. So reducing or stopping benefit.
    So discouraging people from starting up in self employment or keeping it up over time.
    Easier and cheaper for the individual to remain unemployed.

  11. “Universal credit will support a new self employed person for 12 months, though with less support than an employee would get. After 12 months universal credit will treat the self employed person as earning minimum wage for the hours. So reducing or stopping benefit.
    So discouraging people from starting up in self employment or keeping it up over time.”

    What is the alternative? You pay UC continuously to people who claim to be running small businesses that mysteriously never make any profits? Or businesses that make profits but the owner only puts in a few hours a week at to keep the earnings down? The State doesn’t allow you to work for less than minimum wage in PAYE employment, so its entirely logical for it to say if you are self employed that you should be capable of earning that level of income before it will top it up with UC. Giving you a year to get the business to a level where you are making at least MW seems generous to me.

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