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dr.bob
1260111.  Tue Nov 07, 2017 9:22 am Reply with quote

Nobody else seems to have started a thread about this, so I figured I'd give it a go and see if it takes hold.

Obviously, a lot of this subject has been discussed before on these forums. Some people have pointed out that the behaviour is completely legal and, therefore, shouldn't be condemned. Others point out that it is immoral and not upholding the "spirit" of the law, though this inevitably leads to discussions about what the "spirit" of any particular law should be. There's usually at least one person who tries to claim that anyone with a tax-free ISA is doing exactly the same thing, which is clearly not true. So, let's skip past all those old arguments.

One thing that's surprised me so far about the reporting of the papers is their choice of celebrity. One of the people caught up in the tax avoidance is the Queen. This strikes me as an odd choice of person to fixate on since she is the only person in the country who doesn't have to pay any tax. She does pay money back to the treasury that's equivalent to a level of taxation, but she does this completely voluntarily.

The other celebrity focussed on by the news was Lewis Hamilton. I was very surprised that anyone thought "Multi-millionaire who lives in Monaco likes avoiding tax" was shock news to anyone.

The Lewis Hamilton case seems like a simple way to tag a celebrity name to a bigger problem, that of the lax tax arrangements in the Isle of Man. From the reporting of it, Hamilton was far from the only person to have done this. It also seemed pretty clear that the fault lay with the Isle of Man government by not applying EU law properly, rather than with the rich people who then decided to take advantage of this.

I'm now very tempted to start some kind of bet on how long it'll be before we hear the words "Gary" and "Barlow" in connection with this scandal.

 
GuyBarry
1260112.  Tue Nov 07, 2017 9:25 am Reply with quote

dr.bob wrote:
Nobody else seems to have started a thread about this, so I figured I'd give it a go and see if it takes hold.


What I find completely baffling is that I'd never heard of the "Paradise Papers" until a couple of days ago, now every news organization appears to be reporting on them as though they were common knowledge. Did I miss something somewhere?

 
cnb
1260118.  Tue Nov 07, 2017 10:15 am Reply with quote

dr.bob wrote:

One thing that's surprised me so far about the reporting of the papers is their choice of celebrity. One of the people caught up in the tax avoidance is the Queen. This strikes me as an odd choice of person to fixate on since she is the only person in the country who doesn't have to pay any tax. She does pay money back to the treasury that's equivalent to a level of taxation, but she does this completely voluntarily.


A very small part of the Queen's money is invested through accounts in the Cayman Islands and Bermuda. As she is Queen of both of those territories, why would it be odd that she holds some accounts there?

Just holding an account in another country isn't evidence that you are actively trying to avoid paying tax. I expect that most of us with a private pension have a small proportion of our investments in such territories too.

 
suze
1260164.  Tue Nov 07, 2017 1:01 pm Reply with quote

dr.bob wrote:
There's usually at least one person who tries to claim that anyone with a tax-free ISA is doing exactly the same thing, which is clearly not true. So, let's skip past all those old arguments.


Interesting that this question was asked by Lord Ashcroft, of Chichester in the County of Sussex (but mainly of Belize and the British Virgin Islands).

Why should he be so interested to know what a government formed by the party to which he has given shitloads of money considers to constitute tax avoidance?

If this government ever comes to the conclusion that Lord Ashcroft is indeed avoiding tax, it will change the law so that he is beyond reproach. So why his interest?

 
crissdee
1260198.  Tue Nov 07, 2017 2:53 pm Reply with quote

It has also not been stressed enough (imho) that there is a difference between tax "avoidance" and tax "evasion" in that the former is legal and the latter isn't. If they want to stop people using the loopholes to avoid paying tax, then the simple answer would be to close the feckers!

And on what must be one of the earliest doffcocks to hit a thread, how cool did Hamilton's plane look in that golden red paintjob???

 
suze
1260236.  Tue Nov 07, 2017 5:04 pm Reply with quote

crissdee wrote:
If they want to stop people using the loopholes to avoid paying tax, then the simple answer would be to close the feckers!


I don't think you'd find many people at all in disagreement if you were to suggest that the best thing to do with the whole tax system would be to tear it up and start again.

For a dozen reasons that would be all but impossible to do, but unless it is done then as soon as one loophole is closed someone will find another one.

 
barbados
1260241.  Tue Nov 07, 2017 5:23 pm Reply with quote

Its all well and good closing loopholes, but what are we going to do about those that benefit?
Consider for instance that the likes of Gerald Grosvenor uses a loophole to reduce his tax liability by offering a proportion of his property at a peppercorn rent to charities. Close that loophole and you lose the prestigious addresses for charities.

 
Numerophile
1260249.  Tue Nov 07, 2017 5:44 pm Reply with quote

dr.bob wrote:
The Lewis Hamilton case seems like a simple way to tag a celebrity name to a bigger problem, that of the lax tax arrangements in the Isle of Man. From the reporting of it, Hamilton was far from the only person to have done this. It also seemed pretty clear that the fault lay with the Isle of Man government by not applying EU law properly, rather than with the rich people who then decided to take advantage of this.

The Isle of Man is not in the EU, and (except in certain limited respects) is under no obligation to apply EU law, properly or otherwise.

https://www.gov.im/media/624101/protocol3relationshipwiththeeu.pdf

Edit: when I wrote the above I hadn't looked into the Lewis Hamilton case, and hadn't registered that it involved VAT which is one of the areas where EU rules apply. So dr.bob has a point, and I apologise for implying otherwise.


Last edited by Numerophile on Wed Nov 08, 2017 8:25 am; edited 1 time in total

 
suze
1260250.  Tue Nov 07, 2017 5:47 pm Reply with quote

Gerald Grosvenor died last year, so by now it is Hugh Grosvenor, the 7th Duke of Westminster.

It was reported that there was no inheritance tax to be paid when Gerald passed the bulk of his estate - probate value 8.3 billion - to Hugh. Precisely how that was achieved is a question for the Westminsters' lawyers and they won't tell the likes of you and me, but "shitloads of complicated trusts" is the gist of it.

I'm sorry, but I don't care how much of a philanthropist the late 6th Duke was. Andy's mom who died recently was not conspicuously wealthy, but there will be a non-zero amount of inheritance tax to be paid before her estate can be divided between her four children.

It was always the intention that only a very few very rich people should find themselves having to deal with inheritance tax. But by now, it seems that the lower middle class absolutely do have to deal with it but the ridiculously rich don't. I refuse to accept that this is as it should be.

 
barbados
1260254.  Tue Nov 07, 2017 6:16 pm Reply with quote

That is something that is between you and your conscience, I was merely pointing out that when you close these loopholes you don't just take money away from the wealthy.
And with property being the lions share of most estates now, the threshold is pretty high if the will is worded correctly, so a lot of people end up not paying a great deal in inheritance tax.

 
Alexander Howard
1260260.  Tue Nov 07, 2017 6:37 pm Reply with quote

There's not a lot actually to see. An off-shore structure is a way to keep capital in a jurisdiction where capital is not hit for ludicrous tax. It does not shelter the actual income landing in the pocket of the beneficiary: that is income tax wherever they live.

In the UK we have modest tax rates compared with some of the world, and we do not tax static capital. Capital gains, as in the increase in value between when an asset is bought and when it is sold, are taxed at income tax rates, to avoid an obvious tax dodge. If the capital is in a fund off-shore then it avoids that hit, but as soon as the beneficiary gets his income from it, he is taxed on the income, but does not get taxed twice - income and capital.

As a result, the Treasury misses a direct take but the funds invest in developing property that would otherwise be left to fester, or boosting trading companies, all of which actually benefits the nation and even the Treasury more than if the funds were bled dry by tax before they could invest.

There are blatant cheats, like a private jet owned in the name of a fund that has no real use for it. That gets stamped on every so often. Also multi-nationals with wildly artificial income-shifting schemes.

Inheritance tax schemes are another issue - but if inheritance tax were just abolished, which most people want to see, then we would all have equality there.

Overall, whatever the arguments, the super-rich have been paying more in tax year by year, and the funds' investments have given us all those shiny new buildings in our cities that house the trading businesses which pay tax on their own profits. It's a win for us.

 
suze
1260262.  Tue Nov 07, 2017 6:58 pm Reply with quote

barbados wrote:
That is something that is between you and your conscience, I was merely pointing out that when you close these loopholes you don't just take money away from the wealthy.

And with property being the lions share of most estates now, the threshold is pretty high if the will is worded correctly, so a lot of people end up not paying a great deal in inheritance tax.


It's not between the individual and his conscience in the way that some other taxes are, because probate will not be granted until any inheritance tax that is due has been paid. HMRC ensures that it gets its bit before anyone else gets theirs.

As for wording a will "correctly", that's where we move from lawful tax avoidance (having an ISA) to aggressive tax avoidance (making use of loopholes that were never intended). The government doesn't hold with the latter thing, unless - or so it would seem - you are the Duke of Westminster.

In any case, the solicitor is saying that her fee to administer a moderate sized and really quite straightforward estate will be in the region of 8,000. The estate consists of nothing more than a house, some shares, and some money, and the will specifies who gets the house and in what proportions the money and shares are to be divided between her four children. I dread to think how much she would want if the will contained anything complicated.


Alexander Howard wrote:
If inheritance tax were just abolished, which most people want to see, then we would all have equality there.


It would be a popular move, and Canada did it. Even so, it seems to be considered politically impossible in Britain.

A Labour government wouldn't do it on principle since it would benefit the rich more than the poor, while it seems that a Conservative government with no majority cannot afford the negative PR that would accompany a measure that would benefit the rich more than the poor.

 
barbados
1260272.  Wed Nov 08, 2017 1:40 am Reply with quote

It is between an individual and their conscience, if you are happy to close the loopholes (which is what was suggested) at the expense of those that do benefit (the charities in this instance) just because you don't benefit and someone else does then good luck to you. Personally I'm quite happy that the British Red Cross benefit fro paying next to no rent on their head office and as a consequence the Duke of Westminster gets a tax break.

As for the will situation, with a threshold of 425,000 (+ another potential sum upto 325,000 depending on how the spouses will was arranged) 8,000 is an awful lot of money for a solicitor to charge you to do work that could be done with without the need for a solicitor, which is where the careful wording comes in.

 
brunel
1260279.  Wed Nov 08, 2017 3:03 am Reply with quote

barbados wrote:
It is between an individual and their conscience, if you are happy to close the loopholes (which is what was suggested) at the expense of those that do benefit (the charities in this instance) just because you don't benefit and someone else does then good luck to you. Personally I'm quite happy that the British Red Cross benefit fro paying next to no rent on their head office and as a consequence the Duke of Westminster gets a tax break.

As for the will situation, with a threshold of 425,000 (+ another potential sum upto 325,000 depending on how the spouses will was arranged) 8,000 is an awful lot of money for a solicitor to charge you to do work that could be done with without the need for a solicitor, which is where the careful wording comes in.

So, in this instance, because one individual organisation happens to benefit, that therefore means that the whole system is OK?

Alexander Howard wrote:
As a result, the Treasury misses a direct take but the funds invest in developing property that would otherwise be left to fester, or boosting trading companies, all of which actually benefits the nation and even the Treasury more than if the funds were bled dry by tax before they could invest.

I'd be rather interested to see you provide definitive evidence of such a claim, and indeed for a number of the claims in your post in general. It feels an awful lot like the sorts of arguments that the Daily Telegraph put forward to try and justify the tax status of themselves and their owners.

 
barbados
1260287.  Wed Nov 08, 2017 4:17 am Reply with quote

Well in that particular instance more than one organisation/person benefits, but to turn that around are you happy that closing the loophole that allows the British Red Cross to benefit?

 

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