All belongs to us

The tax policy gap is the tax not paid in a country as a result of the decision made by a government not to tax a potential tax base, such as wealth. Additionally it is the value of the tax reliefs, allowances and exemptions given by a government for offset against a source of income that might otherwise be taxable.

Seriously? A potential tax base is all incomes of everyone. Not taxing all incomes at 100% is therefore a tax policy gap?

The definition of tax avoidance has also changed, no?

Tax avoidance is taxpayer determined behaviour where the taxpayer decides to submit a tax return and declare their tax liabilities based on an interpretation of the applicable law of the jurisdiction that the taxpayer knows may be unacceptable to the tax authority of that country. They do so knowing that the risk of their potential misinterpretation of the law being discovered is limited and so the chance of appearing to reduce their liability in ways they claim to be legal, whether that is true or not, is sufficiently high for them to justify the risk of doing so. The scale of this issue is related to the complexity of the tax system and the degree of uncertainty that might exist as to the proper interpretation of the tax rules that it creates.

No, that’s an attempt at tax evasion.

I stress that tax avoidance does not ever include making use of tax reliefs and allowances provided by the law of a country: the cost of these is included in the tax policy gap.

Therefore Vodafone wasn’t avoiding tax, was it? Because the law in place at the time specifically stated that the money piling up in Luxembourg was not taxable in the UK.

He’s changed his definitions. Which means that his numbers or the tax gap should be much lower. But will they be?

In that case not agreeing with a tax authority’s interpretation of tax law is not wrong. Disagreement can be honest.

Well, yes, Vodafone, Boots, Starbucks…..

Does tax avoidance dishonestly appropriate property belonging to another? I would suggest not. I would say it knowingly exploits uncertainty in the law to secure a pecuniary advantage, but that most of those doing it will have secured an opinion from a professional adviser before doing so that the action in question was legal, even if it had an uncertain consequence. And those opinions (which will not be publicly available, but which will be in the possession of the tax avoiding taxpayer) will be more than enough to show that the tax avoider had no intention of being dishonest, precisely because they had gone out of the way to make sure that they had an opinion to say they were acting legally, even if with dubious ethical intention.

And ain’t that a change? It wasn’t long ago that asking for a legal opinion was proof perfect of avoidance. For why ask if you’re not trying to avoid?

47 comments on “All belongs to us

  1. Tax avoidance can be a simple as not selling an appreciated asset and incurring a capital gains tax. There are plenty of people who want any appreciation taxed anyways. They’ll argue that the government needs the money and can spend it more wisely than you, and that you shouldn’t have that appreciated gain in any event because it has made you unequal.

  2. “The tax policy gap is the tax not paid in a country as a result of the decision made by a government not to tax a potential tax base,”

    Would that not mean that the ‘tax policy gap’ is effectively the difference between what the government taxes and all the money in the nation?

    That the ‘tax policy gap’ could never be possibly zero unless everything and all things belonged to the state?

    So, he’s now *explicitly* (not just openly) espousing fascism.

  3. Slightly related.

    Have we just given up on the difference between tax avoidance and evasion ? Even serious newspapers use avoidance to refer to illegal tax evasion.

  4. remember according to the potato – owning your own home makes it a tax haven – https://www.t**research.org.uk/Blog/2017/10/07/homes-should-not-be-tax-havens-but-thats-exactly-what-they-are-right-now/
    and council taxes don’t pay for services. The man’s a moron with a streak of envy a mile wide – that’s why he wants MOAR TAX – he talks about the joy of tax but his aim is to make most people (especially those who have more than him) worse of and miserable. He couldn’t be more of a cunt if he tried – and he tries very hard.
    He’s espousing fascism because he believes he’d be in a position of power to make other peoples lives a misery.

  5. When you realise that money is just a way of putting a figure on what is produced by an individuals labour, you realise he’s declaring that the State owns every single person’s labour 100% – ie we are all slaves to the State.

    What a complete cunt. And a literal fascist.

  6. In spud world, the accepted definitions and conventions of tax law and economics are entirely subordinate to what he deems ethical. He’s risible.

  7. “No, that’s an attempt at tax evasion.”

    Not quite. The more aggressive forms of tax avoidance involve an opinion from a tax advisor to the effect that the tax payer has an arguable case that their tax return has been put together in accordance with the law, even if the advisor and tax payer are not 100% certain it has.

  8. “Tax avoidance can be a simple as not selling an appreciated asset and incurring a capital gains tax.”

    Poppycock. Tax avoidance could be entering into arrangements that have the equivalent economic effect of a sale of an asset without actually selling the asset and thereby triggering again, but what you are talking about is doing nothing and is not tax avoidance

  9. Agammamon
    “Would that not mean that the ‘tax policy gap’ is effectively the difference between what the government taxes and all the money in the nation?”

    To be fair to Murphy, he’s talking about the “tax policy gap” being about “tax base”, not tax rates. So it would be ‘the difference between what the government charges in tax, and all the money in the nation multiplied by the tax rate’.

    It’s unclear how his definition works with different tax rates (but then we could hardly expect him to think his ideas through, and anyway it will have changed by now), but probably his “tax policy gap” is ‘the difference between what the government charges in tax, and all the money in the nation multiplied by the top marginal tax rate’.

    But it’s worse, because he specifically mentions wealth as a potential tax base, and the failure to tax wealth as part of the “tax policy gap”, so it’s probably ‘the difference between what the government charges in tax, and everything in the nation multiplied by the top marginal tax rate’

  10. @ Tim
    Yes, of course *one* potential tax base is all the incomes of everyone. But you are missing the potential of also taxing all the wealth of everyone who is not already insolvent. Harold Wilson had a top tax rate of over 100%.
    @ Agammamon
    I think that you are insulting Fascism (I appreciate that it’s difficult to so but equating it to Murphy seems have found a way). Network Rail may be another possibility?

  11. How is it that he still has his charter?

    Had he given those definitions to a paying client he’d be open to a charge of professional malpractice.

  12. “What definition of fascist are you using?”

    The standard one: all in the state, all by the state, nothing against the state.

  13. “Gamecock

    I would also point out that a tax code that requires a ‘professional adviser’ is perverse.”

    Utter nonsense.

    Would you apply that elsewhere?

    A legal system that requires lawyers is perverse?

    Even the most simplistic tax (or other) laws would be beyond the understanding of many people.

    And simplistic laws are invariably open to interpretation which would have to be established by the courts which would require knowledge of precedence.

    Your statement is the sort of cloud cuckoo thinking beloved on ‘another site.

  14. @AndrewC
    No. He’s correct. A tax system is to raise money to pay for government & what government does. A simple flat tax system – no concessions, no exemptions – would do that. It’s the government using the tax system to attempt to modify behaviour that complicates tax & it’s arguable, in a democracy, it’s the government’s role to provide what people want, not the government to force people to unwillingly do what it wants.
    The more complicated the tax system, the more interfering the government.

  15. Have we just given up on the difference between tax avoidance and evasion ? Even serious newspapers use avoidance to refer to illegal tax evasion.

    Been happening for years. Politicians, the media, ‘commentators’, most are at it – in both ways – using one to refer to the other, yet making the fine distinction when they themselves or one of their allies is shown to be “avoiding tax”. At that point they suddenly become rational again and say “well of course there’s a difference!”

    Anyway, if the entire income of everyone is included in his “tax gap” (and by his own definition it is), then why also include “tax reliefs, allowances and exemptions”? Not only is he including everything in his tax gap, but he wants to double count some of it.

    Of course, why lack ambition and include the income only of everyone in the UK? There are nearly 300m in the USA, over that in Europe. Include their income too. Think of the tax revenue you could raise, and think of the things you could do with it! Which would be nothing, of course, because tax does not pay for spending, as the wise potato has said. Maybe we could put it in a savings account.

  16. I see Richard Murphy uses the word ‘cheat’ to describe Starbucks, Boots etc. Cheating the public purse is a criminal offence. I wonder if the directors of those firms are a aware of his choice of language for them.

  17. Murphy hold both UK and ROI passports. Irrespective of what the tax treaty might say, why is he not making tax returns for and paying tax in both of these countries?

    And what is the legitimate reason that he holds passports issued by two countries given that he seems not to live in one of them?

  18. The tax system should not require ordinary people doing ordinary things and leading ordinary, unremarkable financial lives, to need tax advisers.

    Indeed, one of the failed challengers for Merkel’s job has advocated for the insanely complicated German income tax form to be simplified to one page with four boxes. Name, address, tax ID, and this year’s gross income.

  19. Bravefart, not to defend R against the other charges, but presumably because he is a citizen of both countries according to their respective laws? That’s generally the most common legitimate reason for holding two or more passports.

  20. Bravefart, not to defend R against the other charges, but presumably because he is a citizen of both countries according to their respective laws? That’s generally the most common legitimate reason for holding two or more passports.

    Ah, but is he a citizen of both countries according to the spirit of those laws, or the thoughts those who made them may or may not have had, or thoughts a man in an unimpressive terraced house in Ely believes they may have had, or even on thoughts anyone in the UK may or may not have at the whim of any particular moment?

  21. Alex, doing “nothing” is doing something. If I defer an asset sale so that I can use next years allowances, then I am surely avoiding tax, as my tax liability will be lower. Your poppycock denunciation does not stand scrutiny.

  22. “Doing or not doing something”

    You purchase a capital asset. It exceeds this year’s AIA. You split it into two (it’s separable). Deliver & invoice one half on 31st, the other half on the next day, the 1st (new company tax year).

    You now use 2 lots of AIA. This is doing something purely to avoid tax (absolutely no other reason), and with no economic difference to the buyer. There are an infinite number of variations on that theme?

  23. BIG
    “Bravefart, not to defend R against the other charges, but presumably because he is a citizen of both countries according to their respective laws? That’s generally the most common legitimate reason for holding two or more passports.”

    I’m sorry, I won’t accept that Murphy doing this is legitimate when he claims others doing exactly this are not legitimate.

  24. Not taxing a base + exemptions and reliefs = Tax Policy Gap.

    Nation A sets income tax at 20%. No allowance, no exemptions, just 20% on all income.

    – Tax Policy Gap = 0.

    Nation B starts at 20%, but has a higher band for higher earners, and a tax free allowance. The more income you earn, the higher your income tax %.

    – Tax Policy Gap = Plenty!

    Is he serious?

  25. “@BiS
    A simple flat tax system – no concessions, no exemptions”

    so no – deductions for

    employees’ business related travel?
    contributions to a pension?
    uniform allowance?
    education and training?
    additional costs for working from home?
    Professional fees?
    Use of own phone for business?

    No encouragement for investment?
    No encouragement for R&D
    No CGT exemptions on company reconstructions where effective ownership doesn’t change?
    Dividends taxed the same as income despite being paid post corporate tax? Or maybe dividends are allowable for corporate tax purposes? But are they taxable in the hands of companies?

    rules, we don’t need no rules.

    It’s like saying all you need is one law telling everyone not to do anything wrong and that they’ll be dealt with appropriately if they break the law.

    We could have a simpler tax code for sure but a simple tax code is, as I say, cloud cuckoo land dreaming

  26. “Nautical Nick

    Alex, doing “nothing” is doing something. If I defer an asset sale so that I can use next years allowances, then I am surely avoiding tax, as my tax liability will be lower. Your poppycock denunciation does not stand scrutiny.”

    That’s nonsensical. If some tart was offered £50k to tell all about her affair with a footballer and chose not to you’d say it was tax avoidance?

    If for personal reasons I turn down a few hours overtime it’s tax avoidance?

    It isn’t the case that every single thing that you don’t do that as a by-product results in you paying less tax than would have been the case if you did do it is tax avoidance.

    That’s stretching the definition to the point where it becomes meaningless.

  27. “If some tart was offered £50k to tell all about her affair with a footballer and chose not to you’d say it was tax avoidance?”

    If she was told that the tax man would take 40% of it and she’d be left with £30k in her pocket and decided it wasn’t worth the grief, then yes.

  28. ‘We could have a simpler tax code for sure but a simple tax code is, as I say, cloud cuckoo land dreaming’

    So you support statist control of a private economy. I.e., fascism.

    If the government is to tax gross income, your list of costs is cloud cuckoo land dreaming. Whatever that means.

    If the government is to tax net income, then the lists of costs becomes relevant in determing net income.

    “No encouragement for investment?
    No encouragement for R&D”

    This is fascist shit.

  29. How about :

    A tart being paid not to talk to the papers about her affairs with a candidate is electoral manipulation.

    A tart being paid to talk to the papers about her affairs with a candidate is not electoral manipulation.

    WT?

  30. Back to the original post n; why exactly has Murphy suddenly decided that getting Counsel’s advice on a scheme is fine amd dandy? It just doesn’t add up

  31. Alex. I’m afraid you’re wrong old poppycock. There are plenty of older people hanging on to appreciated assets, notably real estate, until they die so they can pass them on tax free to heirs. In fact, in San Francisco there have been discussions about the number of apartment buildings owned by old widows that sit empty because the owners don’t want to deal with the city’s rent laws and don’t want to sell because of the taxes they’d pay. If the building is owned free of mortgage then they just pay the property taxes and a bit of maintenance, and one day the buildings will pass to their heirs. Doing nothing is a form of tax avoidance.

    This being SF, the usual arguments are about how these old widows can be forced to rent rather than how can you change tax laws to make it attractive for them to sell.

  32. That’s stretching the definition to the point where it becomes meaningless.

    AndrewC, you have just encapsulated Prof. Spud’s modus operandi.

  33. “why exactly has Murphy suddenly decided that getting Counsel’s advice on a scheme is fine amd dandy? It just doesn’t add up”

    Presumably because he’s had to take advice over some part of his legal/tax affairs, and thus its suddenly OK.

    Incidentally is he still operating a LLP with a 1% partner who he’s no longer living with, and presumably is no longer ‘intimately involved’ in all its output, in the way she allegedly was when they were sharing a house?

  34. “Richard
    December 14, 2018 at 12:29 am

    But it’s worse, because he specifically mentions wealth as a potential tax base, and the failure to tax wealth as part of the “tax policy gap”, so it’s probably ‘the difference between what the government charges in tax, and everything in the nation multiplied by the top marginal tax rate’”

    But the top rate not being 100% is a result of *tax policy* – that the government doesn’t tax everything at 100% (or higher!) leaves you with a gap between what the government could do and what the government chooses to do (policy).

  35. “If I defer an asset sale so that I can use next years allowances, then I am surely avoiding tax”.

    Not really. That is just tax management. If you take a out a loan this year repayable solely out of next years property sale and give the lender the right to manage the sale on your behalf, so that you get the cash (as if you had sold this year this year) against next year’s taxable event and allowances, then arguably that is tax avoidance.

    Tax avoidance is when you perform a (usually fairly contrived) set of acts that give you a better tax outcome than a usual activity with similar pre tax outcome but much less advantageous after tax income. Doing nothing vs doing something isn’t tax avoidance because doing nothing and doing something don’t have a similar pre tax outcome.

  36. @Tommydog

    Afraid you are talking through your *rse. in the UK at least the term tax avoidance has never referred to avoinding doing things that give rise to tax. Rather it refers to doing things that give rise to a lower tax charge, either because the tax on an amount of income or gain is lower than it might otherwise have been. or because an activity with nominal profits creates losses that can be set against other income. The example you cite would never be regarded as tax avoidance because the liability to tax will always arise at some point in the fture when the property is sold, and thus the tax is not avoided, just deferred.

  37. Would the Government consider tax-free income earned as grants for political lobbying as a potential tax base? It should have, decades ago.

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