Mary Dejevsky: Tax avoidance - it's not what you earn that counts, it's what you pay

The Chancellor said he was shocked. I doubt that rank-and-file taxpayers would have been surprised

Share

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 That so many givers have (reportedly) withdrawn or reined back donations only shows how far selfish tax calculations, quite as much as benevolence, underlay their generosity.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.

m.dejevsky@independent.co.uk

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

 

In Sickness and in Health: 'I'm really happy to be alive and to see Rebecca'

Rebecca Armstrong
Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine