Tax

Rachel Reeves has said an incoming Labour government would launch a £5bn crackdown on tax avoiders to close a gap in its spending plans exposed by Jeremy Hunt scrapping the non-dom regime to finance tax cuts.

That is, of course, simply a £5 billion rise in taxes. Because avoidance is the entirely and wholly legal process of organising your affairs according to the tax law. Changing those rules will indeed change how much tax is paid. But it’s a tax rise all the same. Because avoidance is that legal thing, therefore to change the rules so that it cannot be done is to raise taxes.

Or, of course, malicious:

Tessa Khan, executive director of campaign group Uplift, criticised the Government for passing on decommissioning costs to the taxpayer.

She said: “The oil giant, which made over £22bn in profit last year, isn’t even on the hook for the whole clean-up operation. Thanks to tax breaks for oil and gas companies, UK taxpayers would have to cough up a large proportion of the decommissioning costs, even when the industry is rolling in profits.”

Lying scum.

As The Telegraph actually explains (which is good, so I don’t have to):

If upheld, the decision will be costly for both Shell and the Treasury, as taxpayers’ money is used to fund the cost of decommissioning North Sea platforms.

Shell’s tax report shows that the company has already claimed £600m in UK rebates since 2018, including £43m last year.

However, this compares to the £20bn of tax revenues generated by the Brent oil field since 1976.

The Treasury treats the cost of decommissioning offshore assets as a genuine business expense which can be offset against profits made in previous years.

The tax on those pfotis in former years has already been paid. So, we’ve now an expense which is allied to those former years’ profits and taxes paid – thus we get a tax credit now.

In his budget speech Jeremy Hunt made the following statement. “The average earner in the UK now has the lowest effective personal tax rate since 1975 — and one that is lower than in America, France, Germany or any G7 country.”

Given that the overall tax burden — the tax take as a fraction of national income — is reaching record levels, it is a remarkable claim. I have neither heard nor seen much commentary on it.

The answer actually is obvious. But not in fact said:

Lots of inflation has been good for VAT revenues.

That’s the only reference.

But the answer is that the tax system has moved – partially, to be sure – over to taxing consumption rather than income. VAT is at more than double the rate it was in 1975. We’ve the insurance tax, APD, landfill tax and on and on and on.

We should have done this too, consumption taxation is less distortionary than income taxation. But that’s what the explanation is all the same.

Currently it is UK domiciles who pay inheritance tax but once the domicile status is abolished, the Government wants the levy to apply to UK residents who have been in the country for longer than 10 years.

What makes it difficult to move abroad and not pay inheritance tax is that domicile status. Residence, thus tax on income, is relatively easy to dodge. Dimicile, thus inheritance, much more difficult.

But if the domicile status is being abolished, then dodging inheritance by moving abroad becomes much, much, easier.

Or so I would logically think at least.

Because Ms Coates earns the majority of her wealth from her salary rather than dividends or other instruments, she is liable for a higher amount of tax than many other business chiefs. Ms Coates and her family are thought to have paid around £460m to HMRC last year.

If you own the company then, well. Salary is paid out before corporation tax. Income tax is higher than dividend tax. But the two together – at these sorts of levels at least, after the small scale allowances – run pretty much the same by design. Corp tax plus dividend tax isn’t far off income tax alone.

NI changes it again. Which is why the personal service company works. But it is still necessary to add in divvie and corp tax together to compare to the income.

The head of Britain’s trade union movement and the boss of a leading retailer have joined forces to demand the government takes tougher action to catch wealthy tax dodgers.

Paul Nowak, general secretary of the Trades Union Congress (TUC), and Julian Richer, founder of the Richer Sounds hi-fi chain, said the public were losing out on up to £36bn a year in taxes owed by companies and individuals that were not being collected.

In a joint intervention before next week’s budget – when the chancellor, Jeremy Hunt, is expected to prioritise pre-election tax giveaways – they warned HM Revenue and Customs lacked the necessary funding to chase down businesses and the super-rich for non-payment, avoidance and evasion.

Avoidance. Structuring your affairs so as to reduce your tax bill. A reasonable enough definition, yes?

Mr. Richer sold Richer Sounds to an employee trust. One of the effects of that is to leave him with no CGT bill. And, if I’ve read the issue right – and there’s no guarantee I have – the funds received also will not form part of his estate for inheritance tax purposes. That last sounds so unbelievable that I’m sure I’ve misunderstood in fact but that is as far as I understand it right now.

This is, of course, wholly, entirely and completely legal. But it’s a bit much to be lectured on tax avoidance by the man, no?

That Britain is a place with American taxes but a desire for Swedish welfare?

with 6.1 million people now paying the 40pc rate compared to 1.6 million when that rate was first set.

It’s not so much US tax rates any more, is it? That’s, umm, 25% ish of the worforce paying the higher tax rate.

HM Revenue and Customs could be forced to repay almost £500m to Uber after a legal victory over the taxman by a rival minicab app.

Memory’s a bit hazy as I don’t really pay attention to Jololyon all that much. But wasn’t he behind that Uber case over VAT?

Uber has argued that VAT should only be applied on the fees the company charges drivers, typically 25pc of a journey, while HMRC has said it should be applied to the full cost of a ride.

In the tax tribunal, Judge Greg Sinfield ruled that “mobile ride-hailing services” such as Bolt should be treated under the Tour Operators Margin Scheme, designed for holiday companies such as travel agents.

The ruling states that the company should only pay VAT on the company’s own fees, rather than the entire journey cost.

Seems reasonable enough to me even as I admit to no expertise at all in the law.

A long-running campaign for the United Nations to have greater influence over international tax rules is expected to fall at the last hurdle in a vote in New York on Wednesday with the US, Brussels and the UK blocking the move.

Jesus no.

We know this because El Patata has told us so:

Jeff Bezos ditches Seattle for Miami after buying $79m mansion in ‘billionaire bunker’
Move comes as Washington’s super rich face the prospect of a 1pc wealth tax

And who are you going to believe, the Solanum of all solanums or your own lyin’ eyes?

Tax experts say the landmark ruling, reinforced by an Upper Tribunal judge after HMRC appealed, proved that the taxman had been wrongly following the law for nearly 60 years.

Actual government doesn’t know what the law is. So, erm, perhaps the law is too complex?

The UK might have missed out on as much as £2bn in tax in 2021 from big tech companies shifting their profits elsewhere, according to an estimate by a group campaigning for greater tax transparency.

Seven of the biggest US-headquartered tech companies, including Apple, Microsoft and Google owner Alphabet, are estimated to have paid £750m in UK corporation tax and the digital sales tax, compared with £2.8bn in estimated tax due had profits not been routed elsewhere, according to TaxWatch, a campaign group.

Big multinational companies often have complicated structures using different subsidiaries around the world. In many cases that makes it near impossible for observers to calculate how much tax they have paid in the UK, and whether the amounts paid align with the amount of activity in the UK.

To try to get around the lack of data, TaxWatch estimated how much UK tax these global groups would have paid if their British subsidiaries declared profits at the same rate as they declare them worldwide. There is no suggestion that the companies involved have evaded taxes illegally.

But the profits are not made equally around the world. Google coding is largely done in CA. Therefore CA (part of the US) should get more of the profits and thus the tax. Etc. We’d all think it pretty weird of Rolls Royce taxes were allocated to where the engines were, no?

‘Money is like muck,” wrote Francis Bacon in 1625. “Not good except it be spread.” No one accuses the father of the scientific method and British empiricism of being a socialist, although doubtless the many Tory critics of inheritance tax will now want to group him with Karl Marx and the liberal elite as dark enemies of aspiration.

They should also add the Greek philosopher Aristotle to their list of leftwing enemies. “Man is by nature a social animal,” he wrote. “Society precedes the individual. Anyone who either cannot lead the common life or is so self-sufficient not to need to, and therefore does not partake of society, is either a beast or a god.”

Inheritance tax is a good thing because it breaks up concentrations of wealth.

Hmm, well, OK. I argue the other way myself – it’s glorious that bit by bit the population builds up wealth to make them free of government.

But Willy. He’s been on £ quarter million a year for some decades now. At one point his (late) wife’s buy to let empire included 10 properties if I’ve remembered that right. There’s significant wealth built up there. Obviously, his wife’s estate didn’t pay tax on what passed on to him. But his estate will be – I would assume at lesat – something substantial.

So, what lifetime gifts is he making to reduce that impact? What efforts to reduce the value of the pot subject to such tax? Any ag land? AIM shares? DC pension pot?

Enquiring minds would just love to know whether he’s making plans to maximise wealth passed on. You know, in those interests of transparency. For a reasonable bet would be that his likely estate will be large enough to make considerable contortions worthwhile.

The number of HM Revenue and Customs (HMRC) investigations that result in prosecutions has fallen by more than two-thirds in five years, with just 11 wealthy taxpayers prosecuted last year.

The number of concluded prosecution cases fell from 749 in 2018-19 to 240 in 2022-23, a drop of more than 67%, according to the figures obtained by the Bureau of Investigative Journalism and TaxWatch.

The statistics reveal that over the same five-year period the number of wealthy individuals – defined by HMRC as those with at least £2m in assets or with income of £200,000 a year or more – who were prosecuted fell from 20 to 11.

Margaret Hodge, the former chair of the House of Commons public accounts committee and a fierce critic of tax avoidance, said: “The scale of decline here is unacceptable. Where is the appetite from ministers for going after tax dodgers? Who will throw the book at these crooks? At a time when families are having to choose between heating and food, there has to be a real impetus to take the fight to those not paying their fair share.”

It is possible that prosecutions have declined because the number of tax dodgers has declined.

As we might, possibly, expect from tougher enforcement. Folk get frit and cheat less. But asking for logic from that combination of Richard Brooks at TaxWatch and Margaret “I’m the only person under the Liechtenstein rules” Hodge is to ask too much.

And here’s someone who really doesn’t get it:

Phil White, a consultant and member of Patriotic Millionaires UK, a group of millionaires campaigning for higher taxes on the wealthy, said: “Given the billions of pounds estimated to be lost via tax havens in the next decade – many of which are in the UK domain – it is hard to believe that HMRC has only prosecuted 11 wealthy individuals in the last year.

“At a time when families are counting every penny spent for mealtimes and totting up the cost of keeping their lights on, HMRC should be doubling down on those who can most afford to pay their taxes – especially so for those doing all they can to avoid paying them.”

Tax havens can be – and in near all cases actually are – used legally. So the amount of money in a tax haven bears no relationship at all to how many are deliberately flouting tax law.

A very large chunk of inheritance tax is paid out of house values. These are concentrated in SE England. Therefore inheritance tax is a tax on SE England.

Grieving families in Surrey pay more inheritance tax than Wales and Northern Ireland combined, analysis has revealed.

Residents of the home county paid £251m in inheritance tax in the 2019/20 tax year, compared with just £97m levied on inhabitants of Wales and £42m paid by people living in Northern Ireland.

So, let’s abolish it then, eh?

Not that this is quite but:

Young people are hostile to income redistribution. It’s not because they’re rightwing – they simply pay too much tax already

But France’s cigarette wars are a sign of deeper problems running through society. International criminal gangs are putting millions of euros into setting up secret illegal cigarette factories in western Europe and France is a key target market – it has among the highest taxes on cigarettes in the EU with the average price of a pack about €11. At the bottom of the chain, the young men selling a handful of packets on the street – many from Maghreb countries or Afghanistan – are often without legal papers and unable to find other work, vulnerable to gangs and making a tiny profit to survive. Those who buy the cigarettes say they cannot make ends meet so have no choice, despite risking a €135 fine if they are caught purchasing illegal tobacco.

More than one-third of cigarettes smoked in France in 2021 were bought illegally, according to KPMG research, funded by the tobacco industry.

Wonder how tobacco tax revenue is looking? NY State certainly managed to puch the price up so far that revenue fell.

This behaviour is entirely predictable. Economic literature shows people are highly sensitive towards increases in taxation.

But we have been told by The Sage of Ely that people do not move because of tax rates. That’s entirely an invention of neoliberalism. So, what is it, the Telegraph are fascists these days?

Yes, that must be it.

Entrepreneurs who give away their companies to their employees are facing a tax crackdown under new Government proposals.

HM Treasury has launched a consultation on employee ownership trusts (EOTs) after it emerged they were being used for “unintended tax planning”.

These trusts allow entrepreneurs who give at least half of a company to employees to benefit from substantial tax breaks themselves

This form of shared ownership has become popular in recent years, most notably when Richer Sounds founder Julian Richer handed control of his hi-fi and TV retail chain to staff in 2019.

Under an EOT, those distributing the shares are exempt from the capital gains tax, while the company can pay its employees bonuses without incurring income tax.

But the Treasury’s consultation – which will be published later this year – could see the tax benefits restricted or removed entirely.

The Treasury said the consultation would aim to “ensure that the reliefs are targeted closely at incentivising EOTs as an employee ownership business model whilst preventing the reliefs from being used for unintended tax planning”.

That means that EOTs are now considered to be tax avoidance – or potentially so. Using Spud’s definition that is – tax relief that was not meant even if it accords with the letter of the law. That’s what “unintended tax planning” means there.

Which really does become amusing. Because TaxWatch, the groupuscule which now houses Richard Brooks, the Private Eye journo who has raged on about tax avoidance for donkey’s years, is funded by Julian Richer out of the monies received from the EOT of Richer Sounds. Which is, arguably and using Spud’s determination, tax avoidance – or could possibly be so.

Quite joyous.

If it is a “private” estate, how come it pays no corporation tax, as every private estate does?

Corporation tax is a tax on the legal form of a corporation. If the estate is not a corporation then it doesn’t pay corporation tax.