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UK: Britain’s tax system is the real villain of the Jimmy Carr case

25 June 2012   (0 Comments)
Posted by: SAIT Technical
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By Fraser Nelson (The Telegraph)

Jimmy Carr is known as the hardest-working man in comedy, performing on more than 200 nights a year. This, in itself, should have made HM Revenue & Customs deeply suspicious. Why put in so many hours if he was really handing over most of his takings to the Government? In theory, he should have been paying tax at 50 per cent, the third-highest rate on the planet. Every gig should have been a joint venture with George Osborne's Treasury. Yet still, he worked like a Stakhanovite. Alarm bells don't sound any louder than this.

It now transpires that Carr was availing himself of one of the many hundreds of (legal) tax avoidance schemes in Britain, to the surprise of no one who has kept track of the pernicious effects of the 50p tax. From the moment Osborne signed up to this rate, it was clear that thousands of top earners were going to respond. Some would work less: stay at home, rather than tell jokes in Tunbridge Wells. Some would emigrate, like the 1,000 British hedge fund managers already exiled in Switzerland. And a significant minority would put a phone call in to one Britain's growing army of accountants, and seek a perfectly legal scam.

When David Cameron promised to "roll out the red carpet” to French millionaires fleeing the proposed 75 per cent rate this week, he was playing his full part in the global tax-dodging game. François Hollande may grumble about his countrymen shirking their fiscal duty. But Cameron could respond: what do you expect with such high taxes? Countries compete for people nowadays. The rich (and their money) have never been more mobile. If the French government grows too greedy, then men in pinstripes will start queuing for the Eurostar.

But when it comes to avoiding the British top rate of tax, well, this seems to be another matter entirely. It is unpatriotic and – the Prime Minister now tells us – "morally wrong”, at least for Brits. It is an odd position to take, given how many entrepreneurs reduce their corporate tax liability as part of the wealth creation process. But some Tory donors believe that Cameron regards all of this as a rather mucky business, and is more comfortable with those who inherited their wealth. Anyway, his new test poses an obvious risk. Can he be sure his friends, family and party donors have not taken steps to avoid tax? And if so, will he say they too are "morally wrong”?

Ed Miliband, to his credit, spotted this trap a mile away. It is not for politicians to lecture people about morality, he said, but to come up with a tax system with fewer loopholes. This is by far the more sensible approach. The real villain of the piece is the hideously complicated tax system, which could have been designed to make the British the Olympic champions of tax avoidance. Every attempt to close a loophole has opened two new ones, and the number of registered tax accountants has surged by 51 per cent since Labour came to power. And they have more toys to play with than ever: Tolley's Tax Handbook has doubled to a staggering 11,500 pages.


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