Tax. Blimey. There’s a 3 letter word to get everyone’s hackles up. 3 letter words can be like that. Tax is a word that never seems to be associated with anything good, or at least I can’t remember it being so. Poll Tax, value added tax, council tax, road tax, even purchase tax back in the old days made grown men and women weep. Indeed it feels like it still does!
And tax is now right slap bang in the centre of our politics. It could well be the key defining subject for the next general Election in 3 years time the way that the tax bandwagon is rolling right now. Mind you, some would say that tax is always the most important issue at ANY general election.
The person who has the most say over tax in the UK is the Chancellor of the Exchequer, currentlyMr George Osborne. Even he is now talking all about tax. How rich people are avoiding tax, legitimately and otherwise, and how this is fundamentally wrong and needs immediate attention and reform.
Even the Mayor of London election campaign has become a race based on whether Boris or Ken has avoided more tax than each other. Some of the media have fallen over themselves to accuse Ken Livingstone of channeling his fees into a company to avoid paying personal tax, an accusation that is fundamentally so naive it must be political. I am no Livingstone supporter, but I do like to see fair play.
Form what I can understand, Mr Livingstone has set up a trading company and that company issues invoices for the goods and most probably services Mr Livingstone supplies – like public speaking, writing, media appearances and so on. That company pays Mr Livingstone a salary on which he pays tax at the national rate. Every year, the company will declare its profits (or losses) and pay corporation tax to the UK Government via the Treasury. The rate of corporation tax (currently has just moved down to 24% from 26%) is different than the rate of personal tax (currently 20% for earnings up to £35,000 and then 40% on the additional earnings between £35,001 and £150,000 and 50% for the earnings over £150,000). Right or wrong, these tax rates start off easy, but soon get complex. So Mr Livingstone will pay tax on his income, via PAYE (pay as you earn) and NI (National Insurance – which is an additional tax of about (12% of your income) which actually ends up being higher than corporation tax, which his company will also pay provided it makes a profit, which one would hope would be the case.
Anyway, this whole tax issue is definitely going somewhere. The politicians know that grassroots feeling towards ‘tax avoidance’, ‘tax management’ and ‘tax evasion’ (that’s the illegal one) is starting to boil over and organisations like 38 Degrees and UK Uncut have been on this issue for over a year now. The Treasury believes that the whole tax system needs a major overhaul, with the goal being ‘simplification’ and there is a mood at the margins to make the UK a tax haven for businesses and individuals, which is something that would encourage inward investment from foreign based companies, principally American, and would only mimic what happens in Ireland, Luxembourg, Switzerland and the Netherlands all of whom have a more company and therefore individually friendly tax regime.
Charities are up in arms because the Chancellor is talking about capping the amount donors can make to charities and write it off against their tax. The media and some MPs are calling for personal tax returns of MPs to be made public. UK Uncut have called for the tax affairs of large corporations such as Vodaphone to be investigated and potential Mayors of London are accusing each other of tax evasion. This whole issue is set to run and run and it will be interested to see where it ends up. As a PAYE person, I don’t have a lot of choice about how much tax I pay. I do like the fact that a charity can claim back some of the tax I have paid on anything I have earned via GiftAid. That really is a nice tax rebate scheme and it does do some good!