The BBC News Magazine recently had a whimsical article (www.bbc.co.uk/news/magazine-18983010) about the recent Tax Justice Network report that suggested that $21 trillion has been stored in offshore bank accounts. And, to be fair, whimsy is the only logical reaction to such a mind-blowingly large figure, which is beyond all human powers off comprehension.
In a previous post I cast some doubt on the reliability of the figures quoted in the report. Having read the following quote from the TJN report, I think I was right to do so:
“…………(offshore) refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional often quite temporary locations of networks of legal and quasi-legal entities and arrangements.”
Now even by the standards of this blog, that is pretty impenetrable prose. Was this what Albert Einstein had in mind when he said:
“Tax is too difficult for a mathematician, it needs a philosopher”?
In this case, I think it quite possibly needs a bulls*** detector. When one bears in mind that TJN is an organisation campaigning against tax havens, it does start to occur to me that maybe they do “protest too much” in this respect. Which makes it a shame that the grain, or possibly whole silo-full, of truth in the report gets lost because of this sort of vague waffle.
The other interesting aspect of the article is its musings on the reasons why the very rich don’t want to pay tax, and particularly the difference in mind set between the employed (who have tax deducted under the PAYE system) and the self-employed, who effectively collect tax and hold it temporarily on behalf of the government before paying it over. The article suggests they see this as their money, and reluctance to part with it fosters aggressive tax avoidance.
This may well be right, but another factor that the article does not explore is the significant tax advantages that the self-employed enjoy. Off the top of my head I will suggest:
- Ability to shelter profits from tax, using companies and dividends.
- More generous expense deductions.
- Lower rate of national insurance.
- Generous inheritance tax exemptions.
- Reduced capital gains tax rate.
This does beg the question, what more do the self-employed want? Should it not be the oppressed employees who rise up in protest at their unhappy lot, rather than the generously treated self-employed? It must indeed be true that “what the eye don’t see, the heart don’t grieve over”, in which case who can be the first to come up with a system whereby the self-employed also pay tax at source on their income? Or is that called VAT? Just a touch of lateral thinking whilst whimsical is on the agenda.