IT was ‘death by taxes’ last week, and a nod of the head to all the secondary charges we never had before (city car parking, hospital car park charges, council tax et al).
Taxes are not the problem, as shown in a survey demonstrating that over two thirds of us would pay more tax to ensure a fully functioning NHS. What is wrong and narks most, is how the taxes are used, oh, and all those corporations and high net worth individuals who don’t pay tax. Bless ‘em.
Hands on his banister, William Pitt the Younger (that’s a mouthful) introduced income tax to the UK in 1799. At a rate of less than one per cent, it was to pay for the Napoleonic wars.
It was stopped and started again a few times but made permanent in 1842.
Today, it’s mainstream in many countries but not all. There are many countries like the UAE which do not charge income tax, instead charging either corporations, tourists, revenue on the production of oil and other such products. Many of these countries do not have large defence costs and so can function very well indeed on their income.
In the West, the numbers swing, with the onus applying to individuals, while many corporates and private individuals do not pay tax at the same rate as everyone else.
Amazon’s main UK division benefits from a ‘super-deduction scheme’ introduced by Rishi Sunak as chancellor, that allowed them to pay no tax on £222 million of pre-tax profits last year. Indeed, it actually booked a credit for tax under the scheme in 2021.
Aside from that project, there is also a study which shows that countries are on course to lose over $5 trillion in tax over the next 10 years to both wealthy individuals and corporations that use tax havens.
Tax is there to ensure we have a civilised society which isn’t just funded by the poor and middle class.
Indeed, the University of Greenwich estimated that a one per cent tax of the wealthiest households in the UK would be sufficient to pay for high quality universal care, the NHS and much more.
I’m in favour. A one per cent tax on a family earning £30,000 bites into their disposal income as they probably don’t have any. On an income of £5 million however, that family’s base costs have long been taken care of, and the disposable income is vast, so a one per cent tax on the income is neither here or there.
Remember that before the pandemic, the top one per cent had more wealth than the bottom 69 per cent. They might argue the extra tax is not fair. I would argue as above, that it is.
It’s therefore disappointing when the Tax Justice Network detailed that the UK and its corporate tax haven network was the biggest enabler of corporate tax avoidance in the world.
They score each country using an index by assessing a jurisdiction’s complicity in helping multinational corporations underpay corporate income tax. The British Virgin Islands, the Cayman Islands and Bermuda hold the top three spaces - all UK jurisdictions.
The UK holds four of the top 10 spots, with Jersey in eighth place.
There has been much talk about a global minimum 15 per cent corporate tax rate. It makes sense. If a country tells a corporation it will have to pay, it could just leave and find another workforce elsewhere. If the tax rate is 15 per cent everywhere, then countries cannot be held to ransom.
The OECD has reportedly been preparing to push for these sorts of measures for over 10 years, with little success. Calls for the UN to take over this role are welcomed in many areas, particularly as the fear of lobbyists impacting taxation is real. The Independent Commission for the Reform of International Corporate Taxation has long been concerned about the OECD’s effectiveness in this central role.
Indeed, the Financial Times reported that the OECD actually pressed Australia to relax rules it was going to put in place. That law would have required thousands of multinationals to publicly state where they pay tax eg BP.
Currently the OECD’s tax reports are not shared with the public…for some reason.
Meanwhile, I can report that the average global life expectancy is 71.7. The top three countries in terms of life expectancy are all tax havens with 90, 86 and 85 years.
The top 10 tax havens have, on average, over 10 years extra life expectancy, so tax does kill.
:: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial query call Darren McKeever on 028 6863 2692, email email@example.com or visit www.wwfp.net.