Ritchie and HMRC again

He\’s desperately spinning the whipping that HMRC have ginve him over his estimations of the tax gap. The latest is this:

So, just to make this clear, in 2009-10, the year for which their latest tax gap estimate for tax avoidance was prepared, they said in September 2011 there was just £5 billion of tax avoidance in all (making up part of the total tax gap in their estimate of £35 billion) and yet by March 2012 they were admitting tax avoidance for just one reason in that year exceeded £6 billion. And yet despite that they are still telling parliament their estimate of the tax gap is better than mine.

Well yes. Because what HMRC defines as tax avoidance is different from what Ritchie defines as tax avoidance.

Ritchie defines it as people doing anything that Ritchie doesn\’t like. HMRC defines it as people twisting the law so as to legally avoid tax.

For example, from company taxation. HMRC says that using capital allowances or the R&D tax credit, if they\’re used properly as capital allowances or against R&D expenditure is not tax avoidance. The way that Ritchie has calculated corporate taxes he is including these in tax avoidance.

If you deliberately bumped up the overhead that you assigned to the R&D budget (say, allocating the entirety of not just the salaries of the R&D blokes but also of the entire CEO/CIO/COO/CFO team to that budget) and then claimed the 125% credit against those expenses then HMRC would call that avoidance….if not evasion in fact.

The reason we\’re getting different numbers is that they\’re actually counting different things.

7 thoughts on “Ritchie and HMRC again”

  1. For someone who claims to be an accountant to include capital allowances in his definition of tax avoidance (and then double-counts it by having a separate article claiming that deferred tax is tax avoidance) implies that he does not understand that capital allowances are HMRC’s substitute for depreciation charges. They only affect the timing of tax payments, not the total to be paid over the life of the asset. Is he really that stupid?

  2. I particularly like this bit

    ‘And yet despite that they are still telling parliament their estimate of the tax gap is better than mine.’

    Clearly the select committee should believe a retired accountant from Wandsworth rather than HMRC.

  3. you can’t say he’s crippled by self-doubt, that’s for sure:

    Richard Murphy [email protected]
    “@NYTimeskrugman: Cameron to Critics: Shut Up http://nyti.ms/J4BD9q” Yesterday I was named as dangerous. Now Krugman is. I’m in good company

    the only time he’ll ever get bracketed with a Nobel prize winner is when someone points out they’re facile, grandstanding idiots

  4. The last thing I called dangerous was a large pile of slippery dog mess on the edge of an unfenced fall. Does Ritchie wish a photograph to hang on his wall?

  5. It’s not surprising he thinks his figures on tax avoidance are better than HMRC’s. After all, this is the man who, early on in his undergraduate career, decided that conventional economics was tosh and he had a superior conception of the way the world works. It’s hard to think of a person whose arrogance is more at odds with his intelligence.

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