John Kampfner: The wealthy should pay more tax. Why has it taken so long?

Three myths are being punctured: that higher levels of tax are a disincentive to the middle classes; that oligarchs will go elsewhere; that they won't bring in enough money
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The Independent Online

One issue confounded me about the last Labour administration more than any other: its approach to the super-rich. The economics was faulty; the politics was misguided; the courage was non-existent.

Since the early 2000s I was among many who had been asking the Treasury (the fiefdom of Gordon Brown) at regular intervals why it was doing nothing about the tax avoidance schemes of non-domiciled citizens, aka non-doms – that class of globalised plutocrats who kept the number of nights in the UK below the required minimum in order not to pay tax on their investments. The response was invariably the same – we're working on it: except they weren't. Then shortly before the general election up popped shadow chancellor George Osborne to scoop the government by announcing a (minimal) levy.

Political spinelessness spawns unlikely bedfellows. As Editor of the New Statesman, I found myself adopting a position similar to that of the Daily Mail. Although that paper came from a somewhat different perspective (to say the least), we shared a fury at the government's deliberate refusal to stand up to the global rich – people who through technically legal but morally reprehensible ruses end up paying a minuscule amount of tax on their copious wealth. I remember Alistair Darling saying to me, with not a hint of shame, that he wanted London to be a welcoming home for Russians, Chinese and Saudis, and that meant low taxation and "light-touch regulation" – for that read asking the Treasury and Her Majesty's Revenue and Customs not to ask too many questions.

Now, following the Nixon-in-China principle, it is the centre-right UK coalition that is taking the lead. I admit they are doing so reluctantly, but Osborne's announcement of a complex deal with the Swiss government and banks marks an important step in the right direction. The agreement involves back payments for previous avoidance, a withholding tax on future revenue and the right of Britain to seek details on up to 500 of its citizens' Swiss bank accounts. This will make only a dent in the sums accrued and does not tamper with the time-honoured Swiss adherence to secrecy, but something is better than nothing. Brown's Treasury did nothing to lobby the Swiss, whose practices are at the heart of the malaise.

Other welcome signals are being sent from around the world. Liliane Bettencourt, Europe's richest woman and heiress to the L'Oreal empire, joined 15 other French business leaders, including the heads of Peugeot-Citroen and Air France-KLM, in arguing that they should contribute more in "solidarity" with the rest of the Republic. President Sarkozy has announced as part of an austerity package a 3 per cent tax rise for those earning more than 500,000 euro. In the US, the mega-billionaire, Warren Buffett, has said he should pay more than the tiny fraction he is required to hand over in tax. Anyone with annual income of more than $1m should pay more, those with over $10m, much more, he said. That is manna from heaven for an embattled Barack Obama. From Britain's business elite the sound of silence has been deafening.

Three myths, propagated for years by politicians and financiers alike, are being punctured. The first is that higher levels of tax for the super-rich serve as a disincentive to the middle classes and to budding entrepreneurs; the second is that the oligarchs will go elsewhere when challenged by "host" countries; the third is that the governments will accrue so little money from these people (because of their clever financial managers) that it is not worth the other hassles. Each of these has been shown to be bogus.

It was the growing sense of unfairness, not an unlikely foray into leftist redistribution that led the Daily Mail to decry bankers' bonuses and other examples of gluttony. The political advantage for a party being seen to be "on the side" of the "hard-working middle classes" was unarguable. For all the laments to the contrary, these people did not flood abroad after Osborne's first mini-skirmish. They enjoy British public schools, are at home with the language, and (in spite of the recent riots and 7/7) appreciate the relative safety of life in London. And even if the money going into the coffers is not as great as it might be, it sends the right signals.

The Conservative-Liberal Democrat coalition has made a few, largely unheralded, forays into tackling tax avoidance of the super-wealthy. But more often than not, HMRC focuses on the easier targets – the less well-off who might, deliberately or otherwise, have been economical with the truth when filling in their tax returns. One accountant I know spends two afternoons a month working for a charity trying to help those who struggle to cope with tax demands. He told me that it took him months to persuade the authorities to stop hounding a man who earned precious little but who had crossed the wrong box on his form. If only they focused their zeal on the tougher culprits.

The Government will, in the coming months, take two decisions that will make clear where its true allegiances lie. One is Vince Cable's attempt to impose a "mansion tax" on large homes. Considerable work still needs to be done on the detail. The Business Secretary needs to ensure that any such move is designed not to penalise the family that has done well, and has put all its available money into property, but those with so many homes around the world they've lost count. But still, in principle, it is a good idea.

The second is the top rate of tax. When Brown and Darling imposed the 50 per cent rate on earnings of above £150,000 shortly before the last general election they did so through gritted teeth. It bears no relation to the punitive tax regimes of the 1970s. I would struggle to find a single person who could not easily afford to pay the extra 10p on every pound earned over that amount. The lobbying to remove the tax rate is born purely of greed.

It is too early to conclude that this Government, more than its predecessor, "gets it" on the issue of the super-rich. There is more to do, and more not to do. It is too early for the rest of the population to put the champagne on ice – or should I say supermarket cava?

John Kampfner is the author of Freedom for Sale', jkampfner.net; twitter@johnkampfner

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