Infamy, Infamy, they\’ve all got it In For Me…..

The far right have always liked to argue that my work on the tax gap is wrong because I categorise tax avoidance as part of the tax gap.

Can you guess who yet?

But this argument is entirely wrong.

Indeed it is. the argument from this little Fuhrerlite right wing bastardo is exactly the opposite. I have no problem at all with \”tax avoidance\” being categorised as part of the tax gap.

My argument is that in calculating the tax gap Ritchie includes legitimate use of tax allowances, people justly and rightly doing exactly what Parliament intended, as part of the tax gap. That is, he states that tax compliance is tax avoidance and thus part of the tax gap.

Note that the Revenue quite categorically say that tax planning – that is using allowances and reliefs provided in law for the intention that parliament considered appropriate (in my lexicon, tax compliant behaviour)  is not part of the tax gap. I completely and utterly agree. I have never once suggested otherwise.

Oh, gosh, really? Perhaps I\’ve got the man all wrong then. If so, my deepest apologies.

So, let us look at The Missing Billions, which is where the estimation of the tax gap all starts out.

In 2006–07, HM Revenue & Customs raised £44.3 billion in corporation tax, of which
£23.8 billion came from those businesses within the Large Business Service. In 2006
the companies in this survey declared UK current tax liabilities of £11.5 billion, or just
under half the total tax managed by this unit. If the estimated loss is extrapolated
across all of these 700 companies then the total corporation tax expectation gap
might be some £11.8 billion. This is an increase from £9.2 billion, which was the
estimate made the last time a similar exercise to that undertaken here was completed,
relating to the period to 2004 30.
As a proportion this may be the highest gap of all. Much may be due to legitimate tax
planning, but by no means all is. Some, undoubtedly, is due to tax avoidance
.
When this sum is added to the £12.9 billion of tax loss already calculated for individuals
it suggests that the total UK tax gap due to tax avoidance can be estimated at £24.7
billion, and rising.

My bolding.

So, do you see what he\’s done there? Yes, he\’s included legitimate tax planning in his estimate of the tax gap. He\’s actually said that he\’s done this.

Just to remind ourselves. From Ritchie\’s report on the tax gap:

Much may be due to legitimate tax
planning, but by no means all is. Some, undoubtedly, is due to tax avoidance
.

Ritchie today:

using allowances and reliefs provided in law for the intention that parliament considered appropriate (in my lexicon, tax compliant behaviour)  is not part of the tax gap. I completely and utterly agree. I have never once suggested otherwise.

Riiiight.

So, let’s summarise this: it is clear that the far right have no idea what they’re talking about, clearly can’t do statistics or appraise them, do not understand what tax avoidance is or, alternatively, peddle straightforward incorrect information for their own political purposes.

Umm, perhaps I\’ll not be apologising after all then.

However, much, much, more exciting than this revelation that R. Murphy cannot even remember his own report (to put the gentlest possible interpretation of these variances in words forward) we have an intervention from a tax accountant. One that I am not competent to evaluate of course but one which is absolutely fascinating:

However, Ritchie\’s real howler is where he claims, on p.11, that large companies pay an average tax rate of 22.2% as if this is evidence of wholesale avoidance.  Ritchie has used the tax payable figure of £47.7bn and compared this to average chargeable income of £226bn to get all frothy at the mouth about the iniquity of this effective tax rate of 21.1%.

But the HMRC figures show that the actual tax charge on those profits is in fact £65.5bn, for an effective tax rate of almost 29% – bang on what you would expect given a statutory rate for large companies of 30%.  This charge is then relieved by the provision of double tax relief on £16.8bn of the tax due, to reduce the actual amount payable to £47.7bn.

What the berk has done is ignore double tax relief altogether.  Double tax relief is an essential part of our tax system to keep it fair.  It ensures that companies that trade in one jurisdiction but are legally resident in another only pay tax on those profits once.  Basically the UK and another country come to an agreement to tax each other\’s companies to ensure that profits aren\’t taxed twice.

Ritchie\’s analysis needs to take account of double tax relief or, as he\’s capably shown, you end up with idiotic garbage as a result.

Now, it looks like he owes Gauke a big apology. And he\’d better go back to the drawing board, because his estimates of tax avoidance are now clearly several orders of magnitude too big.

Assuming this is correct then our international tax expert has managed to forget something really quite important. That corporation tax paid to Johnny Foreigner gets knocked off your corporation tax bill due to HMRC.

Something which, well, no, he didn\’t did he? Seriously? He did? Or not?

Yes, of course I believe Christie but can we get some independent verification? Has he really been banging on about this for all these years without noting this really rather important point? And the TUC has been paying for this \”research\”?

What say you?

9 thoughts on “Infamy, Infamy, they\’ve all got it In For Me…..”

  1. I’m still confused. As far as I can see Richie still keeps talking about “legitimate tax planning” and “tax avoidance” as if they were entirely different things (and at opposite ends of the “goodness scale to boot).

    I thought the big dividing line was between tax avoidance/legitimate tax planning (good) on the one hand and tax evasion (bad) on the other.

    Am I just being dim? can someone help a confused miner?

  2. My biggest beef with Ritchie, the fundamental flaw that explains the quality of his work, is that he’s not interested in learning, he knows it all already, he never acknowledges his errors, he can only respond to people who disagree with him as if they are right-wing ideologues and he never concedes a point. He is constantly having it pointed out that he’s misunderstood something about economics, or said somethings that are inconsistent, or whatever, and he never shows any sign of taking it on board. To the point where I suspect some sort of psychological disorder.

    The problem is that the TUC and others who publish him are not interested in correcting their mistakes either. They like him because he sings the right tune. If it turns out that, in addition to his other errors, he has also cocked up over double tax relief, it won’t make a blind bit of difference to the TUC.

  3. I have no comment to make, because I have forgotten;

    ‘That you are very sad?’

    Which is because I dared to point out that measuring a cost of wages on the prem has nothing to do with their worth as England players. When pointing out that he may be in violation of his own comments policy, we get;

    ‘No – that wasn’t name calling

    I do think you’re sad if you really do think that way

    It was a genuine expression of concern about your lack of comprehension of what it is to be human

    If you misunderstood I rest my case’

    Got that? Point out an obvious flaw in Ritchies thinking and you are sub-human.

    Nice.

  4. Would any sane man (or woman) employ Ritchie to provide professional advice that could be relied upon?

  5. Far be it for me to defend Ritchie but could he have a minor point? I know from first had experience that life is a constant battle with HMRC as the rules are often open to interpretation.

    Lets say the Parliament decides that R&D get relief from corporation tax – suddenly half the HR Department is transferred to R&D. Give capital investment relief and suddenly half the operations team end up in the capital investment departments.

    Having said that, if HMRC accepts the argument it is then legit, but any self respecting company will try it on.

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