Super Rich & Tax

[Marmora Man]

BBC link here http://www.bbc.co.uk/news/business-18944097 to this story. Since, for some reason, I cannot register to comment on the BBC website I thought I'd have my say here.

Individuals pay tax as part of the civic duties that every member of a society should undertake. Individuals have many other civic duties to the society they live in (not killing, not stealing, helping old ladies across streets, being kind to children, being helpful to strangers and so on).

However it is not, to my mind, the duty of every or any member of society to pay more tax to government than is legally due. The occasional philanthropist may choose to do so, but the more sensible philanthropist directs their charity to a specific cause or causes rather than expecting government to spend their money wisely.

I would argue that is is in fact a civic duty of an individual to restrict their tax bill to the minimum under law. If government was also required to balance its books with a set cap on deficit funding then a creative tension would exist - where government must tailor its policies and spending to available funds and, where this is not possible, must legislate clearly and effectively to raise funds (taxes). Political parties would have to be very explicit about their tax raising and spending plans together with any associated budget deficit funding. They would not then be able to make unsustainable promises or borrow their way into an artificial boom.

However, as a realist, I recognise that this utopia is highly unlikely to ever come about and it will continue to be far easier for lazy thinkers to castigate "the rich" for not paying their fair share.

[Loz]

Besides, this number is from the Tax Justice Network, who are the biggest random number generator this side of the National Lottery. They are sort of the antimatter version of the Tax Payers Alliance and equally low on the trustworthy stakes. Why newspapers (and especially the Beeb, who should know better) print their tripe is beyond me.

[Jeremy]

I would agree with you that the emphasis should be on the taxation laws rather than the individuals (my logic being that most people are fundamentally selfish). I also think that too much emphasis is placed on "the rich", when we all know that many people work predominantly cash-in-hand, some of them earning pretty decent money.

But why is it a civic duty to keep tax payments to the minimum? How is twisting the system and exploiting loopholes good for society? Why do you suggest that we should be encouraging this type of thing?

[Marmora Man]

Jeremy said "But why is it a civic duty to keep tax payments to the minimum? How is twisting the system and exploiting loopholes good for society? Why do you suggest that we should be encouraging this type of thing?"

Because this tests the tax laws and legislation. In engineering there is a concept of "testing to destruction" that determines the maximum stress / life / usage a piece of equipment can stand. Individuals and their tax advisors are testing tax laws and it is the duty of government and legislators to design a system that can withstand these sort of stresses.

[LondonMix]

There is a big difference between tax planning and avoidance / abuse. Most companies-- including the firm I work for-- will be very aggressive but won't cross that line. For example, certain "loopholes" exist not by accident but intentionally and the tax authorities in most countries are not only aware of them but have given tax rulings that confirm using them in various ways is okay and cannot be challenged. For example, when the government closed the "loophole" to allow individuals to buy properties with off-shore companies to avoid stamp duty, our tax lawyers called the tax authorities and asked if the same rule for commercial real estate transactions was likely to be changed and was told no, that they decided to leave it untouched?apparently the gov?t wanted to encourage business.

If we are even slightly concerned that our tax planning may be viewed as abusive because its un-tested or unusual we always go for a tax ruling and this is standard practice for many.

Tax planning turns to abuse when someone is exploiting an over-sight by the tax authorities to twist the law into something that was not initially intended, which also happens but people seem to lump everyone into the same bucket. General anti-avoidance rules are being implemented throughout Europe to tackle this less common issue. In the US, everyone is taxed on their global earnings and there are minimum taxation laws. The solutions are obvious and it?s simply that the authorities want the system to work as it does. Most people want to pay as little tax as they can but far fewer are willing to do something patently illegal.

[right-clicking]

I think the only way to get everybody to all pay their tax is to shift the tax burden from Income to energy. That way the more energy used the more tax is paid. Across the board all would instantly reduce usage, regenerative and self generative technologies would take off, energy saving would become a priority as would solar and wind generation.

Proportions would be fairer as those whose activities are low key would avoid paying much, those whom own big properties. run big cars and whose social set has them jetting off to far flung places , would incur the penalties.

The whole planet is in demand for energy and this is growing fast! as China, India and south america catch up, so will the demand, as the stuff is at a premium, in high demand, bloody obvious avenue methinks

[Burbage]

Marmora Man Wrote:

-------------------------------------------------------

> ............................... The occasional

> philanthropist may choose to do so, but the more

> sensible philanthropist directs their charity to a

> specific cause or causes rather than expecting

> government to spend their money wisely.

Sort of. Though the bizarre way in which 'Gift Aid' works means the philanthropist is not just directing their own money, but a comparatively large chunk of potential tax, effectively forcing the government to pay a portion of its revenue to a donkey sanctuary or whatever, irrespective of the need for hospitals, schools or humanitarian aid.

The rich can afford more lawyers than HMRC and can domicile themselves anywhere that'll take their money, so they can 'plan' their tax as they wish. If seemingly-respectable banks think nothing of laundering money for wealthy drug barons and terrorists, when our justice system whores itself out for libel-tourism and our government happily sells the buildings that HMRC inhabits to shady companies in tax havens, it's a fair bet that the rich are likely to get what they want, even if mere citizens don't like it.

So it is, indeed, lazy to imagine that taxing the rich is a viable option. That doesn't mean that the rich pay their fair share, they don't. It's just we can't do anything about it. In that sense, the rich are acting undemocratically. And, for that same reason, individuals shouldn't try to reduce their contribution below what others are paying. If you aggressively reduce your tax bill, however legally, it means everyone else has to pay a little more, exactly as when someone puts in an aggressive insurance claim. That's fine if it's a level playing field, and everyone's using the same, legally sanctioned, clearly spelt-out reliefs and credits. Otherwise, it just penalizes those who can't afford accountants, who aren't very good at maths or who retain their moral scruples.

That may be your point. You may be suggesting that the comfortably-off should join the super-rich in actively reducing their contribution to the minimum they can legally get away with, and thereby increasing the contributions of those who are worse off or retain a shred of dignity. But I hope not. Not just because it's morally repugnant, in the fashionable phrase, but also because it's risky. Governments, and tax authorities, do change their minds, and the consequences can be nasty. Look how unpopular, for some sudden reason, the use of 'service companies' has become in the public sector. Inheritance tax schemes that involve, oddly, wholesale ticket-touting, look as if they might be challenged. And business property relief, effectively a subsidy for buy-to-let, as well as an IHT fiddle, surely can't last for much longer in its current state. You may be able to keep one jump ahead, for a while, but the moment you stop paying attention, you risk getting stung.

Sure, some of those claiming to be worse off - those in the cash-in-hand grey economy, for example - are already doing that to you. But that's not a moral justification for anything. Sure, you should only pay what's due, but you should only pay what's reasonably due, not what you can engineer to be legally due.

I'll admit this is as utopian a vision as your own. Nobody imagines they're not nice people. So when the accountant suggests something, you go along with it and don't pay much attention. When a big-name employer insists you're hired through a service companies, you set one up. When the friendly family solicitor introduces his colleague from the tax planning department, you listen. And when the plumber prefers cash, you pay in cash. In such little ways, most people are happy to corrupt themselves and cheat their neighbours. And that's no reflection on the rich.

[vomc1987]

Why do you suggest that we should be encouraging this type of thing?"

http://www.keyforex.info/g.gif