The Chancellor of the Exchequer was apparently “shocked” to learn that many of the UK’s top tier earners pay next to no income tax, but following the findings of an HM Revenue and Customs investigation, George Osborne has been persuaded of the need to “take action”. I have been convinced for years of the need to floss regularly, yet strangely lack the motivation to follow through on my good intentions. Now, whilst it would be churlish to align the deficiencies of my dental hygiene routine with the likelihood of the Chancellor slamming shut a few lascivious loopholes, it might be fair to ask Mr Osborne to quantify the scale of his “shock”. Personally, if some mischief I’d suspected turned out worse than was predicted, I would describe myself more as disappointed, dismayed even. But if I was “shocked” you might conclude that I was either in the wrong job, or lying.
However, that is me, and I am not the Chancellor. Instead, still no doubt reeling from the “shock”, our gallant hero rides into battle against the malevolent miscreants defrauding the crown of their rightful coppers. But who, I hear you cry, are these merry millionaires? Is it the bankers, the pantomime villain of choice for the muttering many? Or the “non-dom” donors, propping up their parties with one hand on the tiller of a gin palace in San Tropez? Why no! Saint George rides out under the banner of budgetary balancing against pensioners and the charity sector.
Capping tax relief for charitable donations does not so much fly in the face of the principles behind Big Dave’s Big Society, it’s more of a slap, and the great and the good are queuing up to say so. Certainly, allowing higher rate taxpayers to plough unlimited funding into charitable causes, offsetting the amounts against their tax bills to reduce their payments, does indeed reduce income to the Treasury. However, of all the tax avoidance schemes to choke off, it is one of the few that benefits the country, often guaranteeing the survival of organisations that rely upon donations to maintain the work they do in the community. It seems symptomatic of the frankly bizarre PR deathwish that also saw the 50p tax rate reduced, in a perceived tax cut for millionaires, while pensioners suffered with the abolition of age-related income allowances. Far from slaying dragons, George has become one of his own making. And you don’t have to be a blood hound to catch the scent of u-turn trickling from the Treasury. They are damned if they do of course, and damned if they don’t. But given a choice between being wrong and reforming, or just wrong and resolute, I vote firmly for the former.
The distinction between tax avoidance and evasion, is that one puts you in Parkhurst, the other in Monte Carlo. As the Chancellor points out, there are perfectly legal methods of managing your millions to keep your mitts on most of it, from pension fund over-payments to use of tax havens, or avoiding stamp duty and inheritance tax. The government estimate the annual cost to the treasury is in the region of £5 billion. The real figure is likely to be four times that, or more. To really limit the losses needs legislation, and who better to bring it in that the man who avoided capital gains tax by “flipping” the house he assigned as his second home? The Chancellor may have shot himself firmly in the foot with his first barrage in the battle against tax avoidance, but he may yet win the war, if he really wants to. And if he does, I for one will be “shocked”.