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Budget 2012

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CB27
900630.  Tue Apr 10, 2012 1:14 pm Reply with quote

When the Telegraph ran a report about how wealthy earners seem to be paying an average of 10% tax on their income I expected this to be a great boost for Osborne to announce how he's going to tackle the tax avoidance culture, which Labour failed to do much about (Gordon Brown closed the old IR35 scheme and a few other small loopholes, but not the big ones).

However, it seems George still hasn't learned his lessons from the way he botched the Budget presentation and instead announced his "shock" at the lengths people have gone to protect their income.

Really?

This is not only the chancellor for nearly two years, but a shadow chancellor for some time before that, and add to that he comes from a background where his family finances (and his own) would have been handled by experienced accountants who looked to maximise income, he's really that shocked?

Either he's so naive that it seems dangerous to have such a man at the helm of our economy, or he's taking the piss out of people.

 
Jenny
900633.  Tue Apr 10, 2012 1:18 pm Reply with quote

"Taking the piss" was the option that sprang to my mind, I must say.

 
CB27
900641.  Tue Apr 10, 2012 1:38 pm Reply with quote

I think I mentioned before that for some time in the early-mid 90s I wored in company formations and learned a fair amount of how easy it was to avoid tax, which did more to drive me towards socialism than anything else :)

Then in 1993 the Government published a money laundering legislation which supposedly was meant to show financial institutions what not to do, but in effect became an unofficial guide book on how to use various loop holes (among other publications that came out around the same time). The fact that this legislation remained untouched for 8 years shows how complacent Governments were in allowing tax loopholes to be used, but since 2001 there have been a number of amendments, it's just a shame that they were never thorough enough.

 
CB27
902015.  Mon Apr 16, 2012 1:32 am Reply with quote

Some context for the "shock" from Osborne recently at the level of tax avoidance. It's being reported by a number of media sites, and apparently this data is from the Treasury, but I can't find it at the moment (either I'm looking in the wrong place, or it's been released to the media prior to being publicly published).

Some of the data I've gathered so far:

10,000 people earn between £1m and £5m, and 400 earn between £5m and £10m (I assumed there were more people earning over £5m, but I guess it's a question of what constitutes "earnings".

Of the 10k, 3% pay less than 10% income tax, 5% pay between 20%-30%, and 10% pay between 30%-40%.

Of the 400, 5% pay less than 20% tax.

I don't have a figure for how many people earned between £250k-£500k, but 27% were paying less than 40% tax.

I have to admit that, like Osborne, I'm shocked. I'm shocked the numbers of people avoiding tax is not higher, because 20 years ago the idea of about 83% of people earning over £1m paying full tax was unbelievable. There has been a strong increase in top rate tax collection over the past 7 years or so, which I never quite understood because even though some loopholes were closed, they weren't the major ones, so I can only think that the number of high earners has exploded in recent years and that many of the new members of this club tend to pay their tax compared to the old boys :)

This then suggests to me that the 50% tax rate was not a deal breaker for high earners as some claimed, and tax avoidance is more down to the persistent few.

 
Neotenic
902026.  Mon Apr 16, 2012 4:44 am Reply with quote

I will freely admit that I find George's approach to tax throroughly head-scratching - I think it's a political battle that, really, didn't need to be fought and there are probably better things to expend political capital on than changes to the top rate.

But, as I think I said at the time, the only way we'll know how successful the change has been is when we can see the revenue stats from HMRC.

I do think, though, the most eye-opening thing about the stats flying around is just how clearly they show how small the population of super-high earners really is - and when dealing with a group of people this small, it's going to take some quite dramatic changes to policy to make an impact that measures much higher than a rounding error.

It also makes me think that they hyper-obsession, in some quarters, on the earnings of the mega-wealthy and getting them to pay for anything and everything is tremendously disproportionate. The puported list of people earning more than £5m is short enough for everybody included to fit into a single 747 - and, really, just how much can be squeezed out of a group that tiny?

 
dr.bob
902046.  Mon Apr 16, 2012 5:55 am Reply with quote

There's two ways to look at that figure. The first is to say it's so low so there's clearly not much of a problem to worry about.

The other to to say it's so low so there's clearly a problem with people disguising their "income" as other things so they don't have to pay so much tax.

I must admit, when you think of the number of multimillionaires you hear about just in the world of football, 400 does seem an awfully low number, so I tend towards the latter interpretation.

Though I don't think any of us can really say anything definitive about those figures until we understand a bit more about how they were gathered.

 
Neotenic
902056.  Mon Apr 16, 2012 6:30 am Reply with quote

I dunno - I think the Premiership is definitely one area where the intensity of discussion about earnings masks the genuine size of the group, and leads us to instinctively beleive it is bigger than it is.

According to this, the average annual earnings of a Premiership footballer was £1.1 million a couple of years ago, so almost by definition, about half of them will fall under that amount - probably more, as I imagine the top part of the curve is wrecked by a conspicuous few.

And, indeed, we also need to consider how fluid the group may well be - especially when things like sponsorships and endorsements are brought into the picture. Any one individual that may, for example, be worth several hundred thousand to Nike one season may not be worth quite so much the next - it depends on who they think will help them flog the most spangly shoes at that moment.

So, whilst we may well be able to name a considerable number of people that may, at some point, have been part of this group of 400, there's absolutely no guarantee at all that they were all there simultaneously.

 
barbados
902064.  Mon Apr 16, 2012 6:42 am Reply with quote

The problem with that link is it only relates to the weekly wage from the football team.

Wayne Rooney for instances cost himself a £600,000 per year pay cut thanks to losing the contract he had with Coca Cola, but he still has two major endorsements running with Nike and Electronic Arts, and although the figures would be subject to confirmation, you would imagine that they would be of similar figures - and that is on top of his Old Trafford salary

 
Neotenic
902080.  Mon Apr 16, 2012 7:28 am Reply with quote

Sure - but I think the list of footballers holding down those types of really significant endorsements is going to be very, very short indeed. If it is even as long as the list of players in the average international squad, I will be very surprised.

 
dr.bob
902112.  Mon Apr 16, 2012 10:19 am Reply with quote

I found this website which lists the 100 best paid footballers in the world, along with the salary they receive from their clubs.

£5million is about €6million. According to that list, there are 17 players based at UK clubs that are earning €6million or above.

That list claims that Wayne Rooney earns just under £8million from his club. However, it is widely reported that overall he earns around £18million, well over double his basic salary.

Clearly, not every player will be able to earn that level of endorsements but, if we imagined that a player could increase their basic salary from endorsements by an extra 50%, then we'd have to consider everyone who earned €4million or above. That gives us an extra 19 people into the mix (including Craig Bellamy of mighty Cardiff City).

So, there we have 36 people from the world of football. Not a huge number, as you might expect, but we're already almost 10% of the way there to our 400 people earning over £5million. And, bear in mind, that's just the football players. How many managers and club owners will be raking in enough to qualify for our list?

It just strikes me that football is quite a small community compared with the hundreds of multinational corporations based in the UK, so for fully 10% of the highest earners to come just from there seems a bit unlikely to me.

But, as I say, this is all conjecture and prejudice since I don't know how that figure of 400 was arrived at.

 
suze
902128.  Mon Apr 16, 2012 11:36 am Reply with quote

dr.bob wrote:
I found this website which lists the 100 best paid footballers in the world, along with the salary they receive from their clubs.


It's away from the topic so I'll be brief, but that list needs to be taken with a rather large pinch of salt. Siberian salt, probably.

Among those one hundred listed is only one who plies his trade in Russia. That one is a German national (although actually Brazilian, and what with his father being Hungarian his first language is English), and so of course he sends in his tax return on time every year. There are probably a fair number of other players playing in Russia and Uzbekistan who earn similar amounts, but are not necessarily subject to the same sort of financial scrutiny.

dr.bob wrote:
And, bear in mind, that's just the football players. How many managers and club owners will be raking in enough to qualify for our list?


Very, very few football clubs routinely make a profit. Of the leading British clubs, Arsenal is the only one that does, and that is as much to do with a substantial property portfolio as with football. (Manchester United made a profit last year, but since the owners are American and the ultimate holding company is domiciled in Singapore, the club is scarcely British.)

Only eight of the twenty Premier League clubs have a majority shareholder who is UK-domiciled in any case, and all of those people were fabulously wealthy before they bought a football club.

(Everton - Bill Kenwright, theatrical impressario; Newcastle United - Mike Ashley, sporting goods; Norwich City - Delia Smith, cooking on television; Stoke City - Peter Coates, restaurants and online gambling; Swansea City - Martin Morgan, hotels; West Bromwich Albion - Jeremy Peace, City type; Wigan Athletic - Dave Whelan, sporting goods; Wolverhampton Wanderers - Steve Morgan, construction.)

As for the managers, Alex Ferguson (Manchester United) and Arsène Wenger (Arsenal) are certainly in the £5 million a year club, and it's been reported that Roberto Mancini (Manchester City) is as well. The Chelsea manager and the England manager would be too, were it not that the positions are currently vacant, but that probably is about your lot.

 
Neotenic
902144.  Mon Apr 16, 2012 12:40 pm Reply with quote

Quote:
Only eight of the twenty Premier League clubs have a majority shareholder who is UK-domiciled in any case, and all of those people were fabulously wealthy before they bought a football club.


I think this gives a glancing blow to another aspect that somewhat distorts the general perception of the rich and/or wealthy.

The focus here is on income tax, so - naturally - we're looking at high earners. However, part of the reason why the numbers of actual people feels smaller than it 'should' is because of other people that get lumped in with them - and, often, it is the types of people that own football clubs.

The likes of Roman Abramovich, Warren Buffett or Richard Branson (or their UK equivalents, where appropriate) are more asset rich than income rich.

So, while their total wealth may be measured in billions, what they actually take out of the companies they own may 'only' run to the hundreds of thousands - or, like Phillip Green did in a somewhat contentious fashion - they may take a big, fat cheque once, then a much lower amount for many years afterwards.[/quote]

 
CB27
902151.  Mon Apr 16, 2012 1:13 pm Reply with quote

Not sure Philip Green is a wonderful example to use :)

 
Neotenic
902159.  Mon Apr 16, 2012 1:26 pm Reply with quote

Of course - but I'm just using him as an example of someone that is undoubtably super-rich, but does not pay himself anywhere close to £5m a year, so he would not be in this supposed group of 400.

 
dr.bob
902379.  Tue Apr 17, 2012 9:46 am Reply with quote

His wife, on the other hand ;-)

 

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