Has The Guardian taken over The Times?
21 September 2012
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Tax and Fiscal Policy
19 November 2024
I was surprised to see The Times run a front page, a three page feature and a leader on tax avoidance yesterday. The arguments used by The Times, and the specific examples highlighted were particularly puzzling.
The leader states: ‘The wish to better oneself materially is benign and admirable. Realising that goal by tax avoidance is not.’ Try telling that to the teacher who takes out pension AVCs so that she can have a more comfortable income in retirement; or to the labourer who brings back 500 cigarettes from Europe to avoid our punitive tax rates. There may be some forms of tax avoidance that are moral grey areas, but most tax avoidance is done for reasons the government applauds – that is why tax reliefs are provided in the first place (whether they should be provided is a different matter).
There are some legitimate debates in the tax avoidance/evasion debates such as the use of transfer pricing by corporations, but the particular focus of The Times was as bizarre as its arguments. Their target was British citizens living in Monaco; their policy prescription was, in effect, to tax emigrants from Britain at British tax rates.
The Times suggested that the draconian US system of taxation that involves taxing citizens on their worldwide income, wherever they live in the word, should be considered. This is completely unjustifiable. What possible reason can be put forward for somebody who lives in one country but who has citizenship of another country paying tax in the latter country? The citizen does not benefit from the social security provision, welfare provision, policing, infrastructure and so on in the country in which they do not live. To require tax to be paid both in the country of citizenship and the country of residence would be still more unjust. The best argument The Times could muster – indeed, the only argument – was that British citizens living in Monaco benefit from the protection of the British army: surely protecting British citizens in Monaco cannot be an especially large budget item for the UK government.
The companies owned by many of these British citizens who live abroad pay tax wherever they make profits – this cannot be reclaimed even by non-taxpayers. No further tax is paid on the remitted profits or capital gains if these British citizens are not resident in the UK. Of course, no further tax is paid by any other foreign owners of businesses that operate in Britain either. Businesses operating here do, of course, pay business rates and employers’ national insurance contributions as well as corporation tax.
But, there is no case for taxing people who do not live here as if, somehow, non-resident British citizens form part of a worldwide virtual community that benefits from all the things on which the British government spends money. I have a friend who is a British citizen who lives in Singapore. The Times’ proposals would mean that she would pay UK income tax rates on all her earned income in Singapore. First, she would pay Singapore rates of tax and then she would pay the difference between UK rates and Singapore rates. The US has shown that enforcement of this system requires draconian measures. However, any such policy also removes the relationship between taxation, the provision of services and representation. This person, for example, would have to pay UK rates of tax to finance the National Health Service which she does not use and then also pay into the various self-funded social insurance systems that Singapore has for health and pensions (and, if there is an exemption from this for ex-pats, she would have to make private provision, of course).
An examination of the particular cases cited by The Times suggested an overwhelmingly weak argument. Martin Coward, for example, spends 20 days a year in Britain – apparently, he should pay tax to the UK government. Easyjet’s founder, Stelios Haji-Ioannou has hardly ever lived or worked in the UK in his life and spends four to five days a month here on business – he too, apparently, should pay UK tax.
Of course, there is room for discussion about precisely what constitutes a ‘resident’ or ‘domicile’ for tax purposes, but the idea that mobile people should be taxed both wherever they roam and also from wherever they have come has no place in justice or good tax economics. Such people, in fact, do the rest of us a favour. Tax competition, encouraged by mobile factors of production, prevents the state from taking even more in tax than it currently does – and the state taxes way beyond the optimal point. Tax exiles provide a positive externality. Perhaps they should be subsidised!
The leader states: ‘The wish to better oneself materially is benign and admirable. Realising that goal by tax avoidance is not.’ Try telling that to the teacher who takes out pension AVCs so that she can have a more comfortable income in retirement; or to the labourer who brings back 500 cigarettes from Europe to avoid our punitive tax rates. There may be some forms of tax avoidance that are moral grey areas, but most tax avoidance is done for reasons the government applauds – that is why tax reliefs are provided in the first place (whether they should be provided is a different matter).
There are some legitimate debates in the tax avoidance/evasion debates such as the use of transfer pricing by corporations, but the particular focus of The Times was as bizarre as its arguments. Their target was British citizens living in Monaco; their policy prescription was, in effect, to tax emigrants from Britain at British tax rates.
The Times suggested that the draconian US system of taxation that involves taxing citizens on their worldwide income, wherever they live in the word, should be considered. This is completely unjustifiable. What possible reason can be put forward for somebody who lives in one country but who has citizenship of another country paying tax in the latter country? The citizen does not benefit from the social security provision, welfare provision, policing, infrastructure and so on in the country in which they do not live. To require tax to be paid both in the country of citizenship and the country of residence would be still more unjust. The best argument The Times could muster – indeed, the only argument – was that British citizens living in Monaco benefit from the protection of the British army: surely protecting British citizens in Monaco cannot be an especially large budget item for the UK government.
The companies owned by many of these British citizens who live abroad pay tax wherever they make profits – this cannot be reclaimed even by non-taxpayers. No further tax is paid on the remitted profits or capital gains if these British citizens are not resident in the UK. Of course, no further tax is paid by any other foreign owners of businesses that operate in Britain either. Businesses operating here do, of course, pay business rates and employers’ national insurance contributions as well as corporation tax.
But, there is no case for taxing people who do not live here as if, somehow, non-resident British citizens form part of a worldwide virtual community that benefits from all the things on which the British government spends money. I have a friend who is a British citizen who lives in Singapore. The Times’ proposals would mean that she would pay UK income tax rates on all her earned income in Singapore. First, she would pay Singapore rates of tax and then she would pay the difference between UK rates and Singapore rates. The US has shown that enforcement of this system requires draconian measures. However, any such policy also removes the relationship between taxation, the provision of services and representation. This person, for example, would have to pay UK rates of tax to finance the National Health Service which she does not use and then also pay into the various self-funded social insurance systems that Singapore has for health and pensions (and, if there is an exemption from this for ex-pats, she would have to make private provision, of course).
An examination of the particular cases cited by The Times suggested an overwhelmingly weak argument. Martin Coward, for example, spends 20 days a year in Britain – apparently, he should pay tax to the UK government. Easyjet’s founder, Stelios Haji-Ioannou has hardly ever lived or worked in the UK in his life and spends four to five days a month here on business – he too, apparently, should pay UK tax.
Of course, there is room for discussion about precisely what constitutes a ‘resident’ or ‘domicile’ for tax purposes, but the idea that mobile people should be taxed both wherever they roam and also from wherever they have come has no place in justice or good tax economics. Such people, in fact, do the rest of us a favour. Tax competition, encouraged by mobile factors of production, prevents the state from taking even more in tax than it currently does – and the state taxes way beyond the optimal point. Tax exiles provide a positive externality. Perhaps they should be subsidised!
26 thoughts on “Has The Guardian taken over The Times?”
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Same again today. The Times’s solution is impracticable. Even if it worked it would be oppressive and disincentivising. To take the USA as a model, given its ludicrously complicated tax system, is laughable.
But the State owns those born here, didnt you know? The term ‘tax slave’ is not ironic anymore, it’s a governmental aspiration.
“Tax exiles provide a positive externality. Perhaps they should be subsidised!”
Er that must rank as one of the daftest comments ever made…
Considering that those of us on PAYE already subsidise these people, as unlike them I cannot float around the world stashing my cash in untraceable, unaccountable, offshore tax havens…
If everyone paid their fair rate of tax then it could make a big difference, which is why I favour a flat rate tax, with no loopholes, and no avoidance for anyone, tax exile or no.
After all the £6 billion that Vodaphone escaped paying to HMRC, could have made a difference to quite a few people.
Anonymous,
there is no fixed amount of money that the government ‘needs’. Sir Humphrey will ALWAYS tell you that he needs more, that the revenue is not keeping up the ‘enormous challenges we are faced with today’, that providing ‘world-class services’ requires ‘adequate funding’ and all the usual bla bla. Forget Vodafone, forget the alleged tax dodgers. The government would spend their money faster than you can say ‘fair share’. In that sense, tax exiles really do provide a positive externality. They put some pressure on spendthrift politicians, signalising them that there is some limit to how much they can extract from citizens. If it wasn’t for them, your tax bill would go up, not down.
What were the lyrics of that Beatles song again?
Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman
Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman
Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.
@anonymous – it was meant to be a joke, otherwise there would not have been an explanation mark after it. But, there is a serious point. If it were not for tax competition, I am afraid that you cannot assume your tax bill would be lower. It might be much higher, because government could set tax rates higher and spend less efficiently with less effect on revenue. The £6n re. Vodaphone is moot – these issues are disputed. But, I take your general point, and maybe you take mine.
“The Times suggested that the draconian US system of taxation that involves taxing citizens on their worldwide income, wherever they live in the word, should be considered. This is completely unjustifiable. What possible reason can be put forward for somebody who lives in one country but who has citizenship of another country paying tax in the latter country? The citizen does not benefit from the social security provision, welfare provision, policing, infrastructure and so on in the country in which they do not live“
Whomever wrote that piece is ignorant of the UK pension system and the NHS. They are just wrong. (You can be paid a UK pension wherever you live)
I assume the rest is written with as little regard for facts and is as badly researched.
there was an more reasonable point in the Times today re non-doms
specifically why somewhere born here ,educated here living here can claim non dom status
simply because of their father ( but not mother) was born overseas
cannot see the logic ?
@anonymous – I am afraid that what you say is simply factually incorrect. The UK state pension system is contributory. You only receive a pension if you have paid NI contributions. Not only that, if you are non-resident the pension is fixed in nominal terms in a rather bizarre quirk of the system
As an expat living in China but resident in Hong Kong, all I can say is “good luck” trying to make me pay 45% of my earnings in tax to a bankrupt ramshackle of a country.
I came to China to get away from all you crazy socialists.
The food’s better too.
The US tax-everywhere policy in essence turns their citizens into indentured servants financially — no matter where they are, Uncle Sam owns them.
And if they want to leave, they have to buy their freedom with ‘exit taxes’.
Even if this system were to be financially fair, morally it’s totally bankrupt.
Actually when you leave the UK but still pay tax there on pensions or rents or whatever, you pay more tax than a resident on the same income because as soon as you leave you lose your personal allowance.
Philip Booth makes some good points but the fact is that there are many South Africans and Rhodesians living around here who have come back to the UK in old age and who get various state handouts and NHS care but who never contributed to the state in their earning years.
Youcn bet your bottom dollar that if the Monte Carlo residents fall on hard times they will be back here for the same.
Good grief! I moved to Singapore because I was sick of the rat race in the uk and working stupid hours to give most of it away, not just in income tax but vat, council tax etc. We were very careful to sever all ties with the uk, eg selling property, to avoid any possible claim by the uk taxman. If such a ridiculous scheme is brought in it leaves only one option, to relinquish British citizenship. Drastic, but we live in a global economy. Osborne and co would do well to remember this. Uk inc is not an attractive place to do business or be a “worker bee”. Matter of fact, they could learn a few things from the tax system here….simple, low taxation and your NI (or “CPF”) payment go into a pot with YOUR name on it, not just into some big black hole!
Tax avoidance is legal
Remember that ever time you hear some nonce whittering on about it
Tax Evasion is illegal. They are different things
If you are avoiding tax, it is because the law says you can
Some years I paid a million pounds in tax but my personal opinion is that the cost of avoidance by moving to Monte is not worth it.
First there are plenty of exemptions in the UK tax code to use
Second the cost of the Monte move and all the specialists is usually underestimate
Third apart from the uber rich-those with £100 million in NET assets -those moving to Monte are basixcally giving up their homelife for what? a bit more money-is it worth it when you then live in a narrow expat community where the sole topics are adultery and tax avoidance.
I am not sure how many people move to Monte Carlo from the UK. Certainly, some of the people cited in the Times article may have had British citizenship but had spent very little time here (eg Stelios). Tina Green (often cited) was born in South Africa and first married to somebody who was Greek.
Tax Slaves indeed.
Perhaps those sharing in current hysteria around “fair share”,whatever that is, should reflect for a moment on the principle of equality under the law and read something not written by a 23 year old PR SPAD for a change like :http://www.iea.org.uk/sites/default/files/publications/files/upldbook42pdf.pdf.
Or I suggest we should give 100% of our wealth to the state and every week nanny government can dish out what some morally superior LibDem/Socialist/Statist Shepard of the lumpen people deems you have been worth that week in contributing to the collective good. Surely you cannot have an objection to those who know better deciding what is good for you. And at the end of the week if some have more left than others we can take it all away and redistribute it again. And we can do this every week until it gets really fair. Oh what a utopia we could build.
Taxing expats at British rates is nonsense. That said, there would seem to be an argument for applying some kind of fee to expats, because, contrary to the article, they do still have the right to draw on UK services and government spending. Such a fee should be modest, reflecting the low degree to which expats do actually draw on such services. But it would be fair and reasonable to do so.
Buying cigarettes or anything else in Europe is NOT tax avoidance. The taxes are paid in the European Country which is part of the EU and part of the free market.
Im pissed off with political elites and scum trying to stop the public benefiting from the ONLY thing being in the EU gives us.
@anonymous. I am not aware that as an expat I have any rights to draw on UK services and government spending, nor do I want to. Last time I visited the UK I had to pay to see a GP when my daughter got sick. That’s fine with me. Likewise I don’t expect to retire to the UK and collect a “handsome” state pension in a few years time – I appreciate I have stopped contributing into the system. Frankly I’d be amazed if the state pension still exists by the time I retire. Even if it does, it will have been eaten alive by inflation and is hardly going to pay for a comfortable lifestyle. Suffice to say I’ve made my own arrangements!
I’ve seen the “protecting citizens” argument used before, particularly in the US context. If the President is going to send in the marines to evacuate US citizens then it’s only fair that they contribute to the funding of the armed forces. However, it seems far fairer to simply charge those evacuated the cost of the mission, an expense that they could defray through insurance. After all, I’m fairly sure that my former American boss didn’t really feel the need of the US security umbrella in deepest, darkest Stockholm.
@Rachel: “If such a ridiculous scheme is brought in it leaves only one option, to relinquish British citizenship”
And in fact that is exactly what some US citizens do, especially those who inherit property in South Korea, I understand.
@Anonymous 23.30: Strictly speaking that might be true, but the analogy is still sound. If I live and work in another country where tax rates are lower, the taxes are also “paid in the European Country which is part of the EU and part of the free market”. In the same way as with the cigarettes, it would be unfair to then apply UK taxes as well.
The points you make are good but I think the headline promises a more general argument. I think that the Times has become in a more general way steadily more left-wing in the things that it does and does not say. There is another article to be written about that.
Has the Guardian taken over the Times? A long time ago! And the Financial Times and the Economist. I used to think of all three as pro-free-market but they have all been taken over by the Marxists quite some years ago. [SECTION REMOVED BY MODERATOR]