If there is one topic Britons like to talk about even less than their income, it is how much they pay in tax. It is this culture of discretion – secrecy by any other name – that fosters the illusion of decent pay rates at the bottom and allows the really rich to get away with paying disproportionately little tax. Now, though, there are hints, just the barest hints, this could change.
In an interview yesterday, no less a figure than the Chancellor said he was shocked by the propensity of the super-rich to avoid tax. Having asked to see the (anonymised) tax returns of top earners, he had found they were paying, quite legally, an average rate of 10 per cent. Here was confirmation, were it needed, of the claim that many City bosses pay a lower rate of tax than their office cleaners. It was also proof of how much the Exchequer is losing.
While George Osborne may have been shocked, however – less, perhaps, by his discovery than by the patent laxity of the system he presides over – I doubt that rank-and-file taxpayers would have been so surprised. The range of loopholes available to the seriously well-off remains impressive. As Mr Osborne might have said to justify his lowering of the top rate of income tax, if you are a high earner and can award yourself an optional rate of 10 per cent, then it is immaterial whether the top rate is 50, 45, or even the basic rate of 20 per cent. The number is entirely academic.
Something else should be made clear as well. Charities may be squealing about the new limit on tax breaks for donations, but they would do better to campaign against the sudden rule changes that frustrate planning than against the substance of what the Chancellor did. That so many givers have (reportedly) withdrawn or reined back donations only shows how far selfish tax calculations, quite as much as benevolence, underlay their generosity. It is also worth noting that the good causes that will suffer include well-endowed Oxbridge colleges and public schools. Should not some of the money such privileged institutions received in tax-efficient donations have gone to the Exchequer to help our notoriously "bog-standard" comprehensives? If that is what the Chancellor (St Paul's, Oxford, and a £4m trust fund) thinks, maybe quite a lot of other people do, too.
There are not many ways of extracting more tax from the rich, but there are two. The first is the once-modish "flat tax" – which, contrary to common belief, threatens the rich more than the poor, as it removes opportunities for playing off one tax category against another. The second, more realistic perhaps for a country with an advanced tax system, is for the Chancellor to set a minimum portion of income that any individual is liable for in tax. Mr Osborne went part of the way towards this in the Budget by limiting the concessions, including for charitable donations, that any one person may claim. But his latest reading may convince him to go the whole way and introduce a version of the US "alternative minimum tax". That, at least, should raise a bit more for the national coffers than the self-selected rate of 10 per cent.
But there is a third way, which is public shame. And the other recent straw in the wind of tax disclosure was the four-letter slanging match between London's two main mayoral candidates, and even more than the slanging match, its outcome. Within 24 hours of being challenged by the Green candidate, Jenny Jones, to publish their tax returns, this is pretty much what all the mayoral candidates had done. London voters and, more to the point, the British public, now know what Boris Johnson is paid – between his mayoral salary and his writing – what Ken Livingstone earns, with some residual muddle about his company, and how much Brian Paddick (at 53) relies on a generous police pension.
This is more than voters have ever known about the finances of electoral candidates, and it is hard to see how there can be any going back. Ms Jones may not make it to London mayor, but she deserves a small place in history. For while this is just another step in the slow march towards transparency in British politics, it is a key one. The register of MPs' interests shows how our elected representatives top up their salaries; the expenses scandal forced them to be more accountable with taxpayers' money, and for two years now, members of both Houses of Parliament have had to pay tax in the UK. Tax arrangements for top civil servants are also being reviewed.
Until last week, however, even the idea that British politicians would be expected, as their American counterparts are, to publish their tax returns would have been inconceivable. And even now, it seems, many observers have qualms, arguing that some things ought still to be private and discretion is the really British way. MPs, on the other hand, have been unusually quiet. And George Osborne – not a bad spotter of trends – has said, citing the US example, that "We (ie the Government) are very happy to consider publishing tax returns for people seeking the highest offices in the land". With a new opinion poll showing Livingstone's support on the slide following the tax row, budding MPs might be well advised to regularise their tax position in good time for the next election. Paying one's taxes – and being seen to do so – looks set to be the new gauge of electability.Reuse content