Friday, June 22, 2012

Tax

So, readers, are we all a bit stroppy with Jimmy Carr?

I don’t think I am, but let’s see where this ends up.

Funny thing, isn’t it, tax? Does a pretty fantastic job of dividing opinion. For a long time I’ve held a pretty simplistic view of taxation. Actually, that’s a lie. It was a na├»ve view.

I thought that people worked, they paid tax at the appropriate level and there was nothing they could do to influence that payment one way or the other (discussions with HMRC excepted, as seen in this post by @glosswitch). That’s how taxation worked for me, surely it was how it worked for everyone else?

No.

My current understanding is that taxation is only that simple if you are an employee of a company, and your tax is taken directly from your pay packet via the PAYE system.

The moment you step out of that system, the chances are you’re not going to pay tax in the same way as the majority of people. PAYE no longer applies to you.

Once PAYE no longer applies to you, you may have options. Many, many options. How you organise your taxation is filled with choice. The fiscal equivalent of a visit to a Subway sandwich shop.

(A brief aside to illustrate the above, in case anyone hasn’t been to Subway. The first time I went to a Subway I was a student. I was a bit hungover. I was used to sandwich shops having a list of six sandwiches which you chose from. I walked in and looked up at the bewildering array of options on display. SIX types of bread! Roughly one MILLION filling combinations! TWELVE distinct sauces! My brain surveyed all of this and shut down. I turned around and left.)

Among those options are things called loopholes. A loophole is where the people who make up the rules aren’t sufficiently careful or clever and leave an ambiguity. This ambiguity is tracked down by clever accountant types who can then advise their clients of ways to reduce the amount of tax they’re paying.

This is legal.

This is what Jimmy Carr did.

Legally reduced the amount of tax he was paying.

The conversation (as described on Twitter by Jimmy) with his accountant went like this:

Accountant: “Would you like to pay less tax? It’s legal.”

Jimmy Carr: “Yes.”

Be honest. If someone put that question to you, you’d say yes too, right? I didn’t notice too many people falling over themselves to continue paying 22% income tax when the level was reduced to 20%. But maybe that’s different.

Maybe, because us PAYEers just do as we’re told and have no choice we are spared the task of having to make a moral judgement when it comes to our tax affairs.

The people who are angry about what Jimmy Carr has done (and, let’s be super clear here, I’m only using his name because it’s out there. I’m sure lots of other people are up to similar tax trickery) are, I think, angry that he’s not contributing to society in the same way as they are.

Which sort of brings me back to how I feel about taxation now, which is this: I pay tax because I have to. But also because I believe in it as a mechanism to provide support to people who might otherwise end up in really unpleasant circumstances. People who need help in any number of ways. People who are worse off than I am. I pay tax because one day I may need that support myself, and I’d like to know that it will still be there for me, or for Cam or for any number of other people who I care about.

So I'm not stroppy with Jimmy Carr and countless others for looking after themselves and taking legal steps to reduce their tax.

I am stroppy that we're all part of a system which holds personal wealth as the principal indicator of worth, which in turn encourages us all to think that the best thing to do is pay as little tax as possible. In a world where cash is king, how can we expect people to be selfless and voluntarily give it away?


I don't have any answers, but I do know that I'm not convinced that the scapegoating of one particular person is a good thing. Maybe if it leads to a more open discussion about tax avoidance in general. But it won't.


What say you? Are you squirrelling away untold fortunes in Cayman Islands based accounts? Do you not have two pennies to rub together because you gave your last ones to charity? Will our Conservative overlords be made to divulge details of their own tax affairs?

Sorry, that’s a bit long and not that interesting, isn’t it? Still, you’re all at Britmums Live anyway, not reading this :-)

3 comments:

  1. Can't think of an intelligent comment cos am about to rush off, but you raise a good point. The trouble is human nature veers towards looking out of oneself at the expense of others whether it's ducking tax, cheating the benefits system, not telling a shopkeeper they've undercharged. No doubt the system needs to reflect this and close loopholes. I've a very poor understanding of tax but gather that it's so fiendishly complex that even the experts are baffled by it. so presumably if one loophole closed another would be picked open. Depressing.

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  2. Definitely one of those subjects that gets people hot under the collar. I couldn't say what the answer is. I pay tax in the belief that it goes some way towards helping those less fortunate than myself. What truly grates though is when you witness people who are able to play the system but fair play that they know what they are doing as I certainly wouldn't know where to start.

    Unlike yourself though I have no faith in the system looking after me when I need it. I have known too many people need genuine support having worked hard most of their lives only to be told they are entitled to not a penny in their hour of need.

    What the answer is I don't know. Will we ever all be happy with any solution? Probably not.

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  3. The biggest crock of Bull is that 'Tax doesn't have to be taxing'.
    I have been self employed now for over 3 years, and every year I find the whole submission stressful. I want to obey the law, I don't want to find loop holes or give anyone cause to question 'why?' or 'how come?', I just want to pay my tax bill at the end of the year, no questions asked and have done. This is NOT a simple process.

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