Ritchie’s latest tax gap calculation

I noted something curious in yesterday’s new wealth statistics from the ONS.

Chapter 2 of their report says that in 2008/10 there was a UK stock of net wealth of property and financial assets after offset of associated liabilities (like mortgages) of £4,470 billion.

HMRC for the same period says, based on estates of those dying that the equivalent figure was £3,520 billion.

That’s a difference of £950 billion.

And therefore there’s £9 billion of inheritance tax being avoided through offshore.

Except, in the detail of the HMRC calculation:

Notes on the table
1. This table shows Identified Wealth, i.e. the wealth owned by estates represented by those passing through probate in each year, grossed up to that of the living using mortality rates
2. Not all estates require a grant of representation, and hence the identified wealth does not represent the entire population. For 2008-10, this covers 31% of estates.

HMRC isn’t even trying to estimate the total wealth.

23 thoughts on “Ritchie’s latest tax gap calculation”

  1. Bloke with a Boat

    Detail, detail. You can’t let detail get in teh way of a good lefty story, Tim.

    Anyway, I suspect that you are far too late and this will be appearing on the BBC and Guardian websites later and then quoted as fact by New Old Labour as part of their crusade against the rich,

  2. HMRC’s estimate of £3,520 bn missed 31% of estates, if everything is proportionate that gives a total of £5,100 bn.

    So we are overtaxed by £630 bn.

    Well, it makes as much sense as Murphy’s calculations.

  3. Richrad, presumably the 31% of estates covered will tend to be larger estates and so you can’t assume that estates included in HMRC’s figures are in any way representative of those that are not.

    Even so, Richard’s calculation appears to be flawed for the reason Tim sets out. It’s just not a comparison of like-for-like.

    Either he’s considered this and decided not to mention it as it will confuse the issue (or, maybe, his intended audience). Or he’s so happy with finding a potential discrepancy that he has worked out what it might possibly mean before bothering to reconcile the two numbers to see what methodological differences there might be.

    Hanlon’s Razor suggests the latter.

  4. Ben>

    You can use Hanlon’s razor in isolation on any of Ritchie’s statements and come to the conclusion you seem to prefer there. When you apply it to all his statements, though, it’s clear that he’s to competent at being incompetent, to consistently and emotively wrong, to be anything other than malicious.

  5. Ben, which is why I said it makes about as much sense as Murphy’s calculations.

    Although actually it is vaguely useful. Murphy ignores the non-grant estates and so claims that HMRC are under-taxing. If the non-grant estates were proportionate then HMRC would be over-taxing (or ONS wrong, in either case).

    The actual result should be somewhere in between the two, which is just where the ONS figure is.

    If scaling up HMRC’s figure for the non-grant estates gave a result that was still lower than the ONS, then Murphy might have a point. But it doesn’t, so he hasn’t.

    Yes, it’s not accurate enough to say that the two sets of figures are entirely consistent, but our host is correct; there is no grounds for Murphy’s claimed inconsistency.

  6. A Grant of Representation is required to persuade a bank to transfer more than £5000, or to persuade the Land Registry to transfer a house or land.

    So only the smallest estates don’t need a GoR: their combined value is likely to be negligible for the purposes of this calculation.

  7. A GoR isn’t needed for jointly owned property, so a lot of married couples’ estates won’t need it on first death.

    If your main assets are a jointly-owned house, a joint bank account and pension rights, you can have a large estate passing with no GoR needed.

    It also isn’t needed where property is held in trust, because legal ownership doesn’t change, so there will be some very wealthy estates that don’t need it.

  8. To add to the above, a GOR may or may not be representative in any case, since inheritance tax planning often involves passing major assets on well before death.

  9. …in other news, it sounds as if Ritchie will also be getting a hammering on BBC R4’s “More or Less” today (16 May) . The trail suggested it would be investigating the amount of uncollected UK tax, and the cuts to the number of tax collectors.

  10. If ‘The inconvenient truth’ poster from the original Blog is also reading this – Bravo! Absolutely hilarious, and worth repeating:

    ‘Evidence based analysis?!

    To recap:

    “And some is no doubt…”
    “But some too is, I am sure….”
    ” Let’s assume…”
    “…presumably for reasons of…”
    “So let’s assume that one thirtieth of this sum is…”
    “…is likely…”

    So, as I implied, the vast majority of this thread is based on conjecture and assumptions, with those assumptions hardly being independent or neutral, and it clearly ignores any credible assumption that would contradict the pre-determined conclusion.

    Can you really not do any better than this…?’

    To which the man replied in his usual supercilious manner, arguing from spite and not answering the question posed. He really is a grade A moron.

  11. Van

    Be graciousnow ; he’s really had a bad couple of days from my reading of his blog.

    Actually, given the way he’s behaved to you, to me, to just about anyone offering any observation he doesn’t like, there no need for any grace at all!

  12. If your main assets are a jointly-owned house, a joint bank account and pension rights, you can have a large estate passing with no GoR needed.

    That depends what you mean by “large”. If the gross value of the estate is more than a million, including the deceased’s share of jointly-held assets, it has to go through probate.

    Tim forgot to quote this from the notes to the HMRC table “As a large proportion of smaller estates do not require a grant of representation, the smaller estates will be under represented in the statistics.”

    This is not to say that I agree with Murphy’s calculation. One factor he’s overlooked is that the ONS calculation includes the current value of annuities, which are not heritable.

  13. As I’ve pointed out before, we know that the Murph’s numbers are wrong. It’s only a matter of working out in which way they are wrong.

    Today’s ONS numbers point out that pensions savings (not all of which will be defined benefit, or annuities, but a very substantial portion will be) are the largest portion of accumulated wealth, just pipping housing.

  14. So r>g, which Picketty takes to show a few plutocrats will accumulate all the wealth over the next 70 or so. Yet we see today r being accrued by our pensions and our homes over the course of our working lives.
    We are told we must read Picketty’s opus, all of it, or we cannot have any opinion. And yet his prediction, so glaringly at odds with what present data and the evidence of my own experience tells me, is itself to suggest I just shouldn’t bother.

  15. The Meissen Bison

    Ironman: We are told we must read Picketty’s opus…my own experience tells me… I just shouldn’t bother

    I’m very much of this opinion too.

    Its not that often that we can observe the theory and its practical implementation side by side but in this case we’re lucky.

    Admire Picketty and you respect his socialist stable-mate Hollande.

    Nicolas Maduro may have a guiding political philosopher or economic lodestar whom I shan’t be reading either.

  16. RM has now admitted he overlooked annuities. However he has now added in £1trn of chattels.

    However the replacement value of most people’s chattels is far higher than their actual current (second hand) worth.

  17. Ironman

    I admit I haven’t read Piketty’s work yet, but rather like the ‘Courageous State’ by Murphy, I’d argue in order to understand the enemy you have to know what he thinks. Besides which, both need thoroughly debunking and that mammoth task requires reading them. I do (unlike Murphy) respect people like Tim that argue it is wrong to give succour to these avowed enemies of freedom by purchasing their works….

  18. Further to the last comment, no doubt the brilliant GlenDorran will remind us that in his own mind, ‘Murphy is a libertarian’ an unwitting piece of self-satire that would grace the pages of Orwell or Swift….

  19. As I’ve pointed out before, we know that the Murph’s numbers are wrong. It’s only a matter of working out in which way they are wrong.

    You twat

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