How the media and the rich collude to fight the poor

In August a blog post on Sir Philip Green being a ‘tax avoider’ over on Liberal Conspiracy started quite a long debate in the comments over whether Philip Green was really doing anything wrong. The two sides of the arguments can be summarised as:

  1. Why should anyone structure their business or their self-employed working practice in such a way as to make sure that they maximise the amount they pay in tax? Furthermore, how many ‘Lefties’ on the other side of the debate have themselves voluntarily paid more tax than they are legally obliged to?
  2. Yes, tax avoidance is perfectly legal and no laws are being broken by Philip Green, however, he goes against the spirit of the law and isn’t avoiding tax accidentally but has had to purposefully set up his business arrangements in order to pay no tax.

Sir Philip Green has volunteered to help the government save money, he believes that as a successful businessman he can save the public sector money – and maybe he can. However, I have a fundamental moral objection to Sir Philip Green or any obscenely rich person deciding that they know what is best for the public sector or the economy in general. Last year Sir Philip Green paid his wife a dividend of £1.2bn, which meant he avoiding paying around £285m of tax. Sir Philip Green dares to lecture us on waste, on overspending of ‘bloated’ public services whilst at the same time he considers £925m in one year just isn’t enough for him and he has to set-up his current arrangement to avoid paying tax.

One of the arguments employed by people supporting tax avoidance is that essentially because it is legal rich people are entitled to avoid paying tax, they are entitled to keep more of their profit. Entitlement is supposed to work both ways, but strangely the wealthy chancellor George Osborne (personal fortune of around £4m courtesy of his trust fund according to Wikipedia) thinks that when poor people access an entitlement they are actually making an unacceptable ‘lifestyle choice‘.

When a businessman like Sir Philip Green avoids paying £285m in tax in one year because he pays his profit as a dividend to his wife who lives in Monaco it is good business. When a poor person claims disability or unemployment benefit it is an ‘lifestyle choice’ and a sign that the benefits system is ‘completely out of control’.

Call me a liberal dreamer, but I think that blatant, obscene tax avoidance is a sign that the system is ‘completely out of control’. Sir Philip Green has made a ‘lifestyle choice’. He met an accountant / lawyer and chose to pay his earnings as a dividend in this way to avoid paying tax. It wasn’t an accident, it wasn’t the freak result of his living arrangements, it was the intentional creation of a system that meant he would pay no tax on his profits. His lifestyle choice was to take home over £1.2bn a year rather than the meager £925m he would have been left with had he paid tax.

Benefit fraud is estimated to cost the taxpayer around £1.5bn a year, Green’s personal tax avoidance makes up around 1/7th of this amount. In respect to benefit fraud George Osbourne has declared:

“This is a fight. We are really going to go after the welfare cheats.

“Frankly, a welfare cheat is no different from someone who comes up and robs you in the street. It’s your money.

“You’re leaving the house at seven in the morning or whatever to go to work and paying your taxes – and then the person down the street is defrauding the welfare system.

“This money is paid through our taxes which is meant to be going to the most vulnerable in our society, not into the pockets of criminals.”

At no point does he talk about tax avoidance in similar terms. At no point does he declare that the tax avoided by Philip Green is ‘our money’, nor does he complain that we are all leaving for work at seven in the morning and paying our taxes whilst Green is elsewhere avoiding his share. Most offensively at no point does he complain that this tax money, avoided by Green and other million / billionaires is ‘meant to be going to the most vulnerable in our society, not into the pockets of billionaires’.

The attacks on ‘welfare cheats’ will be spearheaded by the right-wing press, alongside their normal outrage that even claiming the child benefit and housing benefits that people are legally entitled to are an unacceptable ‘lifestyle choice’. Type ‘welfare cheats’ into Google and you are met with a deluge of outraged newspaper articles – the Daily Mail currently leads the way with 3 articles on the first page. Now type ‘vodafone tax avoidance’. The fact you are now met with a series of links to forums or the occasional blog post speaks volumes about our corporate-friendly media.

If you missed the Vodafone tax avoidance non-scandal,then let the Private Eye fill you in:

WHEN Vodafone bought German engineering company Mannesmann a decade ago for €180bn, it desperately wanted to use the mother of all tax avoidance schemes so taxpayers would subsidise what turned out to be a massively over-priced mistake. The plan was to route the acquisition through an offshore company.

This, however, would potentially fall foul of British anti-tax avoidance laws, and when the company asked the then Inland Revenue to clear the arrangement, it duly refused.

Vodafone went ahead with the scheme anyway and as of March 2009 the Private Eye suggested that they had already moved €15.5bn into the company, avoiding €5bn of tax in the process. However, HMRC had a strong case and were confident that they could get the money back, a case that was strengthened last year when the court of appeal ruled that British laws could conform with European laws. Vodafone were facing a hefty tax bill, but sadly this was not taking into account:

HM Revenue & Customs’ (HMRC) “permanent secretary for tax”, Dave Hartnett, and his customer-friendly approach to big multinationals.

Despite HMRC’s victories, Hartnett moved the case from his specialists and lawyers – dismissed in recent comments to the FT as “very intelligent people” suffering from “a black and white view of the law” – to a dimmer but more amenable group to negotiate with Vodafone’s head of tax, John Connors, who until 2007 was a senior official at HMRC working closely with Hartnett on handling big business.

The fruits of these talks, conducted without consulting HMRC’s litigators and specialists in the tax law concerned on the chance of success in the courts, was a bill for Vodafone of £800m, with another £450m payable over five years and, remarkably, an agreement that the arrangement can carry on into the future with a promise of no challenge from HMRC. The Eye understands that the settlement also swept up several other Vodafone tax avoidance schemes.

The lost tax is reported to be around £6bn and as the Private Eye makes clear: the staff cuts within HMRC are destroying its abilities to fight tax avoidance. In a final insult to human decency the Private Eye points out:

The Tories have further cause to thank Mr Hartnett. As Eye 1136 revealed five years ago, government cuts adviser Philip Green had personal discussions with Hartnett over his tax affairs while legal battles raged over schemes for husbands and wives to share their income for tax purposes. Dividends from Green’s businesses continue to be paid to trusts controlled by his Monaco-resident wife Tina, undisturbed by the taxman.

Doesn’t it seem to you obscene that George Osborne is picking a fight with welfare cheats and cutting benefits for the poorest people in society when the obscenely wealthy pay nothing in tax – legally or illegally – even though they could clearly afford to?

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