Whose money is it exactly?

Hope you’ve all been keeping well while I’ve been taking a blog break. With the madness that surrounds us it’s always good (and sometimes necessary) to shut out the noise and clear one’s head of the idiocy and wrongheaded nonsense that defies reason and logic.

So, the horsing around continues. This essay isn’t about the horsemeat farce – Richard has been at his blistering best showing up the ignorance and incompetence of most politicians and journalists about food regulation and the EU’s competence control of it, and there’s really nothing I can add of value. Suffice to say if you have not read his post about the involvement of Nestlé in the scandal then you really should.

No, this is about the political arrogance and media’s hysteria and misrepresentation surrounding the subject of taxation.  According to a typically statist article in the Independent, tax avoidance schemes:

are costing the Treasury £5bn a year by exploiting loopholes in a complex system designed to help businesses, the Public Accounts Committee (PAC) said.

Apparently the committee was scathing about the performance of HMRC, which, it says, is losing a game of cat and mouse with companies that promote aggressive tax avoidance.

That assessment sums it up. Costing the Treasury money?  How very dare some people and firms try to keep what actually belongs to them.  While there is nothing new under the sun here, it is deserving of focus because of what it reminds us about what is wrong with governments of every stripe,  namely that they believe they are entitled to the money we earn – our money – and that it is theirs to do with whatsoever they wish.

Tax avoidance is perfectly legal and responsible, yet HMRC is being criticised by MPs for not collecting more money from businesses and individuals for whom there is no legal necessity to pay it.  Despite the actions of tax advisers, and the businesses and individuals who rightfully want to hold on to as much as possible of what they earned, MPs and HMRC are engaging in a game of setting traps to seize more money and demonising those people and businesses who manage to retain their money legally. Look at Starbucks, accused of not paying its fair share and disgracefully maligned by MPs and the media, it actually does make a loss in the UK even before its supposedly controversial (yet under EU law perfectly legal) transfer pricing to its European headquarters. Yet as a result it has been pressured into voluntarily paying over money to HMRC, worsening its UK losses and most likely resulting in cost cutting that could affect jobs.

This is an outrageous inversion of the way things are supposed to be. The state has assumed for itself the position of master, rather than servant. And when it doesn’t get what it wants it bullies, threatens, slanders and character assassinates those who justly stand up for themselves.  And now MPs are calling for this so called informal ‘naming and shaming‘ to be made into a formal approach.

The inversion looks set to be extended by something even more dangerous – as evidenced by a discussion on BBC Radio 4 this morning – where a recommendation was being made to follow the approach taken by the Australian tax authorities.  This is where schemes designed to be tax efficient are not permitted until they have been examined and then approved by the authorities. Such a change would represent a move away from a position where an action is lawful unless proscribed by law, to one where the action is considered illegal until permission for it is granted. This is not the definition of freedom within a society. It is defacto enslavement.

Lets not forget it is the state, in the guise of grubbing politicians continually making unsustainable and unfunded spending pledges, that has caused and is deepening the financial mess this country is in.  The same state thinks it can arrest the decades-old slow burn implosion of our economy by seizing more of our money. It is as desperate as it is futile.

The fact is successive governments have, over a period of decades, been buying votes with our money by inflating and extending the welfare state. The emergency safety net originally envisaged for the welfare state has been gradually replaced by unfunded gerrymandering to buy off voters, creating an unaffordable client state.

The notion of living within one’s means has been abandoned by many Britons and by the government itself.  Instead of government recognising it cannot keep doling out an ever increasing number of billions of pounds to people to subsidise their lives – even when they are actually working – and cutting welfare spending to all but the most needy and vulnerable, governments have embedded a handout culture that has been funded by ever increasing borrowing.  This has been exacerbated by the adoption of increasingly delusional and unaffordable European approaches to welfare combined with a rapid increase in eligibility for benefits for foreigners who come to these shores.

The system is broken and the UK is bankrupt in all but name, owing a total of 900% of what the whole economy generates. The irresponsible politicians and feckless fools who believe in something for nothing are to blame.  It is only low interest rates that are keeping the country clinging on by its fingertips as it tries to service ever rising debt repayments.  Yet incredibly this Cameron-led coagulation government which promised to tackle and reduce debt is actually borrowing even more money than the feckless Blair and Brown government before it.

If the UK economy was a business, the organs of the state would immediately close it down and ban its directors from ever running a company again. But instead we have desperate politicians engineering the state sanctioned theft by HMRC in a desperate last gasp effort to undo the folly that has built up over many years.  It is an utter waste of time because the government’s own policies add more to the debt burden than can ever be replaced by even 100% taxation.

So back to the original question in the title of this essay.  Whose money is it exactly?  The answer is simple and unsurprising.  The money we earn through our endeavours is ours. The tax system is being abused, but it is the irresponsible and profligate previous and current governments that have been abusing it and continue to abuse it for its own self serving ends.  In such circumstances it is not only understandable that people and businesses are aggressively looking to be as tax efficient as possible, moreso than ever they are completely justified in doing so.

Footnote:

It’s interesting that George Osborne has been finding that despite record levels of people in employment, the UK’s tax receipts have actually been falling.  It’s common sense really and not just because more people have part time rather than full time work.  Many more productive people have started working for themselves due to redundancy or uncertainty with existing employers, forming small limited companies, they are discovering they can set their tax arrangements to ensure they pay no income tax or national insurance.  In fact they can pay corporation tax only on company profits after allowable expenses, and as long as they keep dividend payments below the higher rate tax threshold they pay no tax on that either – with some doubling the tax free dividend amount in their household if their spouse is a shareholder in the company too. If their spouse is also a director of the company an extra £7,488 of tax and NI free income can be taken in by the household.

I know this because it’s what I am now doing and it means for taking a small risk by being self employed I can keep more of what I earn.  It’s worth any fight with HMRC for the reward and the sheer bloody satisfaction of not having as much of my hare earned money pissed up the wall on moronic pet projects like wind turbines and imported benefits claimants by the useless idiots in Whitehall. Forget the claims that the Thatcher era made people selfish. It’s this supposed compassionate era since that is making people say enough is enough and look to themselves. The money I earn is being used to clear all my household’s debt and to purchase gold which will hold its value far better than our steadily devaluing paper currency, so I can leave something with intrinsic value for my children in what is likely to be a harsher economic climate that even that we have today.

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13 Responses to “Whose money is it exactly?”


  1. 1 permex 19/02/2013 at 10:25 pm

    What’s to say?………………the lunatics are running the asylum.
    Maybe if EVERYBODY earning a wage /salary went simultaneously on strike for a while, some twisted minds would be better concentrated.
    Thank God I don’t live in The Midden.

  2. 2 Captain Ranty 19/02/2013 at 11:08 pm

    AM,

    “Whose money is it exactly?”

    Frighteningly, it’s theirs.

    Once the money (tax, fine, VAT, whatever) hits their account it is legally theirs.

    If you doubt this, try and take ALL of your money from your bank account. If it is over their proscribed limit, the money stays with the bank. Yes, you can switch bank accounts, or you could withdraw it all in dribs and drabs, but the point remains.

    Once it hits “your” account, ownership transfers to the bank, or in this case, to the government.

    This is one of the thousands of facts I wish I didn’t know.

    CR.

  3. 4 Robin Macfarlane 20/02/2013 at 7:26 am

    Hi Auto, for once I have to go against your well thought out blog. You have everything backwards like the MPs,Bbc & even many economists. you start from the Thatcher statement that Gov’t has to balance taxes against spending. This is not true. In households &business there is limited income so spending has to have a BUDGET. In Gov’t they CREATE our currency by marking up A/Cs electronicaly.Therefore there is no limit on “income” or Spending. As Warren Mosler says in his book “Seven Deadly Frauds of Economic Policy” Gov’t does not need to Tax or Borrow in order to fund it’s projects. So long as it spends on Infrastructure & within it’s own Shoreline

  4. 5 Autonomous Mind 20/02/2013 at 8:47 am

    So to clarify your argument Robin, where does the money to fund these government projects come from and, more importantly, go to?

  5. 6 BulloPill 20/02/2013 at 11:21 am

    Thanks, AM for a great post which puts into words so many of my own thoughts.

    I don’t know if it’s the education that folks have had (or not had), or whether the drip of BBC propaganda has had an effect, but I find it’s become nearly impossible to discuss this matter with people I regard as otherwise intelligent friends. There is a real feeling “out there” that profit is a bad thing, rather than a reward for investment risk.

    Of course, the corporates have hardly helped, with senior people helping themselves to ever grander bonuses whilst offshoring activity, trimming headcount, and failing totally to make a public case for commerce and industry.

    And maybe it’s easy to see why an earner of an ordinary crust who is tax squeezed until dry would feel that big organisations are wrong when they make moves with the declaration of profits in a way that is denied him or her.

    It’s the biggest would-be beneficiaries of the largesse of the public purse that make the most noise, completely drowning out whatever taxpayers, both large and small, have to say on the subject.

  6. 7 Steve 20/02/2013 at 5:21 pm

    If it is legally OK for a multinational franchise to pay less tax than the local businesses it competes with, then it is to our benefit if we collectively make it clear that it is *not* morally right for the multinational to pay less tax.

    The state is only complaining about this situation because the electorate has expressed its feelings so strongly.

    The tax systems of the world are creations of individual governments. For most responsible governments there are two aims – collect money to pay for the country’s infrastructure etc. and collect money in such a way that it does not discourage economic development too much. The latter aim is complicated because governments try to tax certain activities less than others (to encourage innovation, or to encourage activity in poorer areas etc.).

    This seems inevitably to lead to loop-holes where the spirit of the law is not matched by the legal syntax. Taking advantage of a loophole that was clearly not intended is different to taking advantage from a government promoted tax break. It means that a multinational is able to put out of business local companies *purely* due to the tax benefit it receives and not in anyway due to the fact that its business is run better.

    It is also a waste of intellectual capital if bright people are using their skills to find loopholes in laws rather than find ways of running businesses better and more efficiently.

  7. 8 JohnM 20/02/2013 at 7:05 pm

    They literally print the money. The infamous “bail-outs” were not gifts as such, they merely bought-back government bonds from the banks who purchased them.
    As for the bright people finding loopholes in laws…that ended when the tax authorities contracted the services of large accountancy companies…now it is more like ensuring that loopholes are sufficiently implanted in legislation from the start.
    As for self-employment. Been there. Not again. Too many cases of people self-employed being denied that status by the revenue and having to find large amounts of wonga to pay the vigorish. I would need to ensure that I could not be considered “bogus” self employed….and that tends to change with the political will of the day.
    As for tax avoiding companies….you could say that they have lower overheads as a result, so they unfiarly compete with smaller companies who cannot/will-not go the avoidance routine. Even as a self-employed I refused to do what commonly happens…big car as “company transport”…and all the other barely-concealed fiddles which accountants so very cautiously invite you to examine.
    At the end of the day I have little time…and none at all for talking to HMRC.

  8. 9 Steve 20/02/2013 at 7:44 pm

    One reason why tax levels may be falling while employment rises is that many of the people going “self-employed” are forced into it by their employer, but are not competent enough to manage their tax affairs. My friend who works occasionally for courier firms is finding that large numbers of their blue-collar staff members are being forced out and replaced by self-employed van-owning drivers being paid less money to work longer with fewer rights.

    And lately they are being picked off one-by-one by the VAT man because many of them don’t have a clue. They also spend all their money as soon as they receive it so won’t have money to pay their tax bills. One even believes that because he’s destroyed all his records he’ll get away without paying any income tax. Such is the reality of the entrepreneurial renaissance.

  9. 10 JohnM 20/02/2013 at 10:17 pm

    If they use the other companies transport, and insurances, then they are NOT self-employed. Self-employment, according to the revenue, is where the person sets their time and rate for the job themselves and uses their own resource.
    “bogus” self-employment is where they use another persons/companies tools and assets and only provide the labour.
    Very costly when clobbered.
    Not forgetting the need to inform the revenue of your “new” employment status. 12 weeks to so do.

  10. 11 JohnM 20/02/2013 at 10:17 pm

    Oh, and single-person-self-employed now pay the tax up-front.

  11. 12 JohnM 22/02/2013 at 5:09 pm

    Mind you, you could remove some £375 billion from the overall debt, since that, and more, has been “quantitatively-eased” into the economy and would reduce the overall debt (re-purchasing government bonds etc before time and also reducing the interest to be paid).
    Of course, the real problem is, as I have said somewhere before, the private debt of several trillions due to multiple re-leveraging of debt and derivatives “purchases”.
    It depends on your viewpoint, and politics, doesn’t it

    http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx

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