Britain’s financial services sector is booming, as everyone knows. It generates jobs, provides vast amounts of tax revenue, contributes a surplus of nearly £20bn to the trade balance and helps make London one of the most vibrant, cosmopolitan cities in the world.
But the runaway success of the City also means that Britain is increasingly dependent on a largely foreign-owned sector, that London is experiencing explosive house price growth, and that income inequality is on the rise, despite this government’s redistributive measures.
There seems to be something in the air. In recent months we have seen the usually secretive heads of private equity firms given a rough ride in the Commons, papers like the Telegraph and the Mail issuing objections to the tax privileges granted to the super-rich, and increasing calls for a rise in capital gains tax. In the new issue of Prospect, editor David Goodhart and economic consultant Harvey Cole explain why the super-rich pay so little tax, and explore some of the options for squeezing more out of them without frightening them away from Britain.
1–Eat Them.
2–Put big x’s on their back so Al-Quaeda will leave the rest of us alone.
3 Tax them Swedish-style. No evidence exists to say that they won’t take their capital to cheeper labor markets, anyway; so what are you going to do, race to the bottom American-style?
This is a profoundly disappointing article.
The statistics do not match HMRC data (http://www.hmrc.gov.uk/stats/income_tax/table2-5.pdf). No other source is indicated. The conclusion must be that they are wrong, out of date or misinterpreted.
That evidence of poor research is compounded by some very obvious mistakes. For example, the US does not “tax citizens on their global income and then negotiate double taxation reliefs with other countries”. It taxes citizens on their word wide income and gives them credit for taxes paid elsewhere.
But worse, in an article on taxing the super-rich in the UK is the simple lack of undertsanding of how the UK tax system works. We do not “to tax residents only on income they earn from work or investment within the country, or on money they bring in”. Nothing could be further from the truth. We tax UK domiciled individuals on their world wide income. Bringing it into the UK, or not, has nothing whatsoever to do with the liability.
When the authors of this article so clearly do not undertsand tax it is hard to place any credibility on the conclusions they reach. And no one should. Those conclusions are not credbile. In a magazine that seeks to explore issues of social significance from a left of centre perspective it is disappointing to note that the underlying sentiment of this piece is to conclude that the rich will always get away without paying tax. No attempt has been made to review the significant and growing body of thought on how to tackle this issue in the interest of social justice. This is reflected in the work of the Tax Justice Network (www.taxjustice.net) and in material that can be found on my own blog (www.taxresearch.org.uk/blog).
I’m left with three thoughts. The first is why not ask someone who knows about tax to write on the subject? The second is why not explore the real options that are available to tackle this issue? The third is why not set this issue in the context of social justice rather than in the setting of the rewards of the rich? Why not indeed Prospect? After all, is there any bigger issue on the political agenda than the taboo one of tax?
Richard Murphy