It really does take a spectacular brand of idiot to take something that has widespread public support, i.e. avoidance of tax by the richest people in the country, and present it in such a way that charities and other organisations, not to mention the majority of the country, are offended and outraged on a grand scale.
In the same week that millionaire George Osbourne professed to be "shocked" at how widespread tax avoidance was (despite engaging in it himself), the latest jolly wheeze from the "You Couldn't Make it Up Room" (aka Cabinet Office) was the severe restriction of charitable donations. Never mind that in the grand scale of things, this sort of dodgy donation only accounts for a very small amount of lost tax revenue. Now charities will lose out and some of the most generous people in society are branded tax-dodgers.
Well done you pair of fools. You've managed to mess up something that no one else could have imagined you'd be able to mess up.
Update 16th April 2012:
I listened with interest to a piece on this subject this morning on BBC Radio 4's Today programme. The interviewee, David Gauke, Exchequer Secretary to the Treasury, was saying that it wasn't right for high earners to be able to remove themselves from the tax system, or reduce their effective rate of tax below that which they should be reasonably be expected to pay.
On the face of it, this is a reasonable statement, but again shows how little consideration has been given to this proposal. Let's take an imaginary high-flyer, earning a nice round £500 000 from whatever industry they happen to be in. Let's suppose that they give £470 000 of that to charity, leaving them with £30 000 in actual income. This is what they pay tax on. Because that figure is below the higher tax thresholds, this person would pay 20% income tax on that part of their income above the personal tax allowance. This is the ConDem headline that results - "XXX pays only 20% tax on earnings of £500 000". Whilst this is strictly true, it is of course hugely (and deliberately) misleading.
If someone earns £500 000 but gives £470 000 of it to a legitimate UK charity, how much income do they really have? Why shouldn't they pay tax on the remainder of their income? What is the difference between the above example, and someone earning £30 000 and doing, say, 200 hours of voluntary work for a charity? Is the latter "avoiding tax" by choosing to spend their time working voluntarily, when it could have been spent earning taxable income? Of course not, and here lies the folly in this prepostrous scheme.
The other opinion stated by the David Gauke was that everyone has to contribute to costs of defence, education, health etc. This might give us rather more insight to the real reason for this policy. The ConDem Government is not in the least concerned about the very rich who avoid tax through loopholes, and then keep the difference. Nothing substantive has been heard about that side of the debate.
This leads me to some conclusions.
Update 16th April 2012:
I listened with interest to a piece on this subject this morning on BBC Radio 4's Today programme. The interviewee, David Gauke, Exchequer Secretary to the Treasury, was saying that it wasn't right for high earners to be able to remove themselves from the tax system, or reduce their effective rate of tax below that which they should be reasonably be expected to pay.
On the face of it, this is a reasonable statement, but again shows how little consideration has been given to this proposal. Let's take an imaginary high-flyer, earning a nice round £500 000 from whatever industry they happen to be in. Let's suppose that they give £470 000 of that to charity, leaving them with £30 000 in actual income. This is what they pay tax on. Because that figure is below the higher tax thresholds, this person would pay 20% income tax on that part of their income above the personal tax allowance. This is the ConDem headline that results - "XXX pays only 20% tax on earnings of £500 000". Whilst this is strictly true, it is of course hugely (and deliberately) misleading.
If someone earns £500 000 but gives £470 000 of it to a legitimate UK charity, how much income do they really have? Why shouldn't they pay tax on the remainder of their income? What is the difference between the above example, and someone earning £30 000 and doing, say, 200 hours of voluntary work for a charity? Is the latter "avoiding tax" by choosing to spend their time working voluntarily, when it could have been spent earning taxable income? Of course not, and here lies the folly in this prepostrous scheme.
The other opinion stated by the David Gauke was that everyone has to contribute to costs of defence, education, health etc. This might give us rather more insight to the real reason for this policy. The ConDem Government is not in the least concerned about the very rich who avoid tax through loopholes, and then keep the difference. Nothing substantive has been heard about that side of the debate.
This leads me to some conclusions.
- This is intended to ensure that Government retains control over charitable schemes, so throttling off smaller charities benefitting the poorest areas of society.
- Since Government seems not to be bothered about what Vince Cable called "abusive tax avoidance", perhaps this has been offered as a sacrificial lamb so that they can say "we tried to stop tax avoidance but it was so unpopular we retreated from it".
- Cameron's Big Society was never intended to be financed by the "Conservative Classes", the really rich. It was intended to be contributed to by the rest of us, earning considerably less.
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