Jimmy Carr and tax

I admit that I’ve never been a fan of Jimmy Carr and am surprised to learn just how much he has apparently been earning for his rather predictable anti-establishment comedy. But if people want to pay to laugh at him, fair enough – nobody is forcing them.

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.

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

5 thoughts on “Jimmy Carr and tax”

  1. Posted 21/06/2012 at 14:11 | Permalink

    “Retrospective legislation and publicly shaming individuals are the methods of Putin’s Russia”

    Could not agree more!

    Have you seen s58(4) of the Finance Bill 2008?

    Over 3000 people, including myself, are suffering from retrospection.

  2. Posted 21/06/2012 at 14:46 | Permalink

    Completely agree Lucozade. Retrospective tax (s58(4) of the Finance Bill 2008) will bankrupt myself and leave my family homeless, all when we did nothing wrong and followed the law as it was.

  3. Posted 21/06/2012 at 15:30 | Permalink

    Couldnt agree more with previous comments: it is just as morally repugnant to impose retrospective taxation onto any individual or company several years down the line when they were within the law at the time. If this becomes the norm then I fear for the future of the democratic rights of everyone living here.

  4. Posted 21/06/2012 at 18:31 | Permalink

    It would be wrong to make a scapegoat of Jimmy go Polly Toynbee was pontificating in Carr. He is not the only high profile leftie in showbusiness and the media to be profiting from his left wing political stance while behaving in every other way like a whig.

    A couple of days ago Polly Toynbee (multi millionairess, multi home owner) was pontificating about how the wealthy should be soaked to sort out the Euro Zone ebt crisis. [sentence removed by moderator]

    I find the money management antics of people whose politics are right of centre easier to tolerate. At least they are not hypocritical about using legal but morally dodgy methods to keep hold of their money.

  5. Posted 22/06/2012 at 21:41 | Permalink

    It terms of retrospective tax arrangements they did the same thing with QNUPS or QROPS in Singapore. They were pension trusts that could bet people out of all sorts of tax and still operate, but they were frozen in Singapore and some other places because people abused it, apparently. Anyway to cut a long story short they introduced restrictions and punished people who entered the schemes.

    If the inland revenue persist in this people will find ways around it that will not only cost them revenue but could take the service people create in the society away. Having to pay tax is acceptable for people in general, but having the HMRC tell you later on that you have to pay more when you have complied to their requests will make people leave the country.

    It can also ruin people’s lives who spent money they were told belong to them, then having to pay it back later on. This kind of sloppy approach to tax payments makes the revenue service look amatuer and also corrupt. The consequences of this will be migration of the most talented, not because they are not prepared to pay tax but because they are not sure how much they have to pay.

    The issue of clarity is as important as the lost income through taxation. If a person cannot plan their tax they cannot plan their finances this creates a whole new host of problems.

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