I am more surprised – and, frankly, disappointed – to see the Prime Minister of this country attacking Mr Carr by name and describing as ‘morally wrong’ his involvement in what is by all accounts a perfectly legal way of minimising tax, the K2 scheme by which earnings are turned into untaxable loans which are never repaid.
The Prime Minister cannot be in full possession of the facts in Mr Carr’s case and he should be wary of setting off a bullying witchhunt against individuals in this way.
I agree with Ed Miliband: rather than lecturing us about what is or is not morally acceptable, Mr Cameron should be giving us a lead in the way he was elected to do – changing the law rather than demonising individuals. And, incidentally, any changes in the law should be prospective rather than retrospective. It seems HMRC, encouraged by politicians, is increasingly fond of making it up as it goes along and declaring tax schemes illegal after they have been implemented.
We pay far too much tax on incomes in Britain and it is hardly surprising that high earners, particularly those with limited shelf life like popular comedians, want to keep as much of their income as possible.
While philanthropy is admirable (and I understand that Mr Carr donates a substantial amount to good causes), paying more tax than necessary is a foolish and undirected form of giving. The Chancellor appears belatedly to have recognised this; hence his recent climbdown over tax relief on charitable donations.
The fact is that our tax system is hugely and unnecessarily complicated. One of the lengthiest tax codes in the world is studded with all manner of exemptions dreamed up by successive chancellors and their advisors to secure short-term political benefits and have something to pull out of the hat on budget day – that 19th century theatrical nonsense which needs chucking in the dustbin of history.
The system needs a thorough rethink and simplification, including a reorientation towards expenditure taxes rather than income and wealth taxes – which distort employment decisions and incentives. And we need to move away from the notion, reinforced by the current government in its anxiety to seem fair in a climate of austerity, that the state has the first claim on all resources.
These are things which the government could and should do something about. It should not be using the methods of dodgy governments outside the rule of law. Retrospective legislation and publicly shaming individuals are the methods of Putin’s Russia.