Billions lost to tax dodgers.

[sinkov]

Well no, not really, just more Labour lies and Fake News.

There’s a lot less tax dodging than campaigners imagine
By Tim Worstall @worstall

Most people who had money in overseas accounts paid tax or weren't liable.

A tax crackdown has brought in a third of what campaigners claimed it would

Most of those investigated either already paid tax or were not liable for it

Campaigners have hugely over-estimated how much tax is dodged.

Her Majesty’s Revenue and Custom’s crack down on tax-dodging has brought in about one-third of the amount that it was predicted to raise. And HMRC’s estimate of the tax gap – the amount being dodged – is some one-third the amount that had been claimed by the more vociferous of the anti-tax dodging campaigners. It’s possible to think that there might be a connection between these two facts. Such as: perhaps the campaigners are simply wrong in their estimates?

That’s not quite the way some are playing it. The Guardian and John McDonnell – naturally, since he is an opposition politician – are claiming that HMRC don’t have the resources to chase it all, or that the Tories aren’t chasing their rich friends, or that neoliberalism has run rampant, or some such excuse. The true explanation is very much simpler – the shouting about how much tax is being dodged is misinformed.

One of the more egregious campaigners is Richard Murphy, whose estimates tend to be up at the £120 billon-a-year end of the range. Remarkably, papers written by him and funded by PCS, the taxmans’ union, argue that this is because there aren’t enough taxmen nor are they paid enough. Ho hum.

HMRC’s own estimates of the amount of dodging are about one third of that figure. And everyone agrees that the entirety of any tax gap will not be closed – indeed, that not even the majority of the gap ever will be. That is because some people will still risk dodging tax – whatever the penalties they faced or the attempts made to catch them.
That HMRC’s collection efforts should have achieved some one-third of the results that campaigners had claimed – before legal changes were introduced – would be achievable seems, therefore, about right. And there’s really not much more to it than that.

One of the particular changes is a good example. There were claims that billions upon billions of pounds could be raised in tax revenue if only we could find out who was stashing stuff in Swiss banks. So eventually a deal was struck whereby the banks would comb through their books for UK passport holders with accounts. Then there would be checks whether tax was being declared and paid upon the income from those sums. But in the end the answer given by the checks was that, by and large, yes, it was.

For the campaigners had forgotten about a couple of details. UK citizens who don’t live in Blighty (technically, are not resident) don’t owe UK tax. And there are a certain number of those people who have Swiss bank accounts. Equally, those who are resident but not domiciled (a fiddly technical bit) don’t pay UK tax on foreign earnings that they leave in foreign accounts. There are tens of thousands of such people – and they tend to be drawn from the richer members of the population.

Examination of all those Swiss bank accounts found four groups of people. Instead of some vast number of people hiding huge income streams, there turned out to be people declaring their earnings and paying the tax, people who don’t live in the UK, people who do but don’t owe tax anyway and then, as a rump, those who were truly dodging tax. That’s why the tax yield was so much lower than predicted; because the original claims insisted nearly all of those people were dodging tax, not some almost trivial proportion of them.

Much the same was true of the Panama Papers of course. There was a great deal of “shock horror” coverage of how David Cameron had money in an offshore fund. Upon which, as it emerged, he was paying his UK taxes. Far too many people did not understand one basic reason why a fund might be offshore in the first place – so that everyone could pay the correct tax. You put the fund where there’s no tax, so that the fund holders from different countries can pay the amount appropriate to the tax laws of their own country.

Other claims about tax abuse and dodging are even less founded in evidence. Starbucks really was losing money in the UK (because they were paying too much in rent). Boots was largely funded by debt, and since interest is a cost of doing business, it is deducted before the calculation of a tax upon profits. Vodafone actually won their battle through the legal system after the Cadbury ruling, the essence of which was that UK tax law violated EU tax law and so wasn’t legal.

And the Liechtenstein Disclosure Facility has always amused me immensely. The offer was that if you’d been hiding stuff in that Alpine haven then you could own up and the authorities would go easy on you. Some did so – but only one person was publicly named: Dame Margaret Hodge, one of those who had been leading the pitchfork-wielding mob. It’s only fair to add that her use of it was entirely just and righteous, and concerned familial arrangements made before her time, without her knowledge – and which didn’t, in any case, even bring any advantage under current law. But it is still amusing.

These are just a few examples of why screaming about tax dodging isn’t very useful. The amount being dodged isn’t anywhere near as large as is claimed. Given which, all the initial claims about how much will be raised turn out to be invalid. It’s not the collection efforts which are failing but the fact that the initial estimates are all wrong. And in that case, perhaps we should stop paying quite so much attention to those making the claims?

Tim Worstall is Senior Fellow at the Adam Smith Institute.

[alfinyalcabo]

Trillions lost to soap Dodgers as well.

[alfinyalcabo]

Trillions lost to soap Dodgers as well.

Thats not fake news either..

[1959_60]

Interesting article and one (at least partly) backed up by the following article

https://fullfact.org/economy/tax-avoidance-evasion-uk/

The big issue seems to be the multinational companies who plonk their headquarters in the most beneficial place to avoid paying shed loads of tax. This issue can only be solved by the various countries working together to come up with a workable solution.

Even places like the Isle of Man are an anomaly, in effect robbing us of £££ of tax which really should be paid to HMRC. But...it is not illegal, so can you blame them?

I am a tax avoider - I have an ISA - but this seems to be OK.

[sinkov]

I am a tax avoider - I have an ISA - but this seems to be OK.

Of course it's OK 59/60, and I don't even see how it can be classed as 'avoidance'. The government says no tax is payable on ISA investments so you're not avoiding anything, you can't avoid paying something that's not due anyway.

[The Bedlington Terrier]

Tim Worstall is Senior Fellow at the Adam Smith Institute.

So what? Does that make his opinion more valid than the Shadow Chancellor of the Exchequer?

Perhaps his ancestry and old money is mired in the Slave Trade too?

[NZClaret]

What is wrong is that the Duke of Westminster leaves 8.3 Billion pounds and when he croaks it gets passed down without any inheritance tax. These super rich can get the best accountants/lawyers on the job and hide it away while the rest of us are shafted. Same goes for the Channel Islands and Isle of Man banking, they are glad to have the protection of being part of the UK but don't pay towards it. No one in their right mind wants to pay more tax than they have to just for governments to squander and line their own pension nest eggs but these loopholes for the rich need sorting out.

[1959_60]

Agree NZ. It is up to the Government to put in place measures that are workable. It is the job of accountants to save their clients paying unnecessary tax.

It is a bit like one of those water balloons. Try to squeeze the tax avoider in one direction and the accountants make it pop out in another place.

[The Bedlington Terrier]

From a fairly independent "no axes to grind" source, we are losing nearly £200 billion a year in all sorts of dodges...

http://experian.co.uk/blogs/latest-t...ond-every-day/

[NZClaret]

From a fairly independent "no axes to grind" source, we are losing nearly £200 billion a year in all sorts of dodges...

http://experian.co.uk/blogs/latest-t...ond-every-day/

Those at the top of the tree and the parasitic layabout work shy spongers at the bottom need reeling in. It is those in the middle who get out of bed and go to work day in day out that are subsidising the lot of them. The tax system and benefit system needs a complete overhaul, billionaires paying sod all and people leaving school, spending their life sucking money out of the system with free heathcare and a pension at the end is a joke.