Tuesday, 19 April 2016

Talking about tax avoidance: weasel words

With recent revelations about rich people legally avoiding tax, it seems a good time to tell this story.

In late 2013, I received an email telling me that I could potentially save huge amounts in tax on my pension. I thought this must be a particularly sophisticated spam: poverty in the UK was rising fast, and I have high earnings, so why would pension rules be changed to benefit me? But no, I checked it out and it was all legal and above board.

All is made clear in this piece*. The phraseology has some gems: I particularly enjoyed 'the appropriate crystallisation event, such as the point of death', but behind all the talk of accrued benefits and recovery tax charges, the message seems to be that the Government had introduced a new measure that would increase the amount of tax paid by rich people, but HMRC had immediately provided a legal means for avoiding this, 'Fixed Protection'.

I'm fascinated by the use of language: the word 'protect' has entirely positive connotations: my online dictionary defines it as 'keep safe from harm or injury'. We hear of tax 'shelters', 'tax-advantaged savings vehicles' and suchlike. But what is achieved here is tax avoidance by rich people – all aided and abetted by HMRC.

If you have money and you talk to solicitors or financial advisers, you'll find that the default assumption is that you want to pay as little tax as possible. I first came across this when making a will: the solicitor concerned started describing how I could set up a complex trust that would mean less tax would be paid on my estate. I don't have dependents so this struck me as particularly pointless. I'd be dead and wouldn't care. The solicitor looked at me aghast and clearly thought I was barking mad.

I'm not a saint and I'm not an idiot. I have some savings. But I live a comfortable life and don't need to squirrel away vast amounts of dosh. And I grew up in the 1960s when, although things weren't perfect we had a reliable National Health Service; schools had adequate resources; there were grants to support people through university. The current generation may find it remarkable that until I was about 30, I never saw a beggar on the streets of any British city. Now we have food banks. An equable society that looks after the most vulnerable costs money, and that money comes from taxes.

I'll leave the last word to J.K.Rowling, who is one of the few rich people who seems to get it:

I chose to remain a domiciled taxpayer for a couple of reasons. The main one was that I wanted my children to grow up where I grew up, to have proper roots in a culture as old and magnificent as Britain’s; to be citizens, with everything that implies, of a real country, not free-floating ex-pats, living in the limbo of some tax haven and associating only with the children of similarly greedy tax exiles. 

A second reason, however, was that I am indebted to the British welfare state; the very one that Mr Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism. On the available evidence, I suspect that it is Lord Ashcroft’s idea of being a mug.

*I found this on Google search: I don't have any dealings with this firm of solicitors, but as far as I can tell, what they say matches the advice I had earlier, and is pretty standard

Tuesday, 12 April 2016

To: the World
From: Deevybee
Re: We have a problem

Everyone I know is exhausted by email. You can spend a day battling back the incoming tide of messages, but next morning when you wake up, there it is again. Much of it is spam and can be deleted without reading, but it still absorbs attention and energy. But there's plenty of other stuff that sits there in your inbox eyeing you balefully until you respond. People I know divide into two classes: those who have given in and just live with an oppressive burden of 500 unread messages, and those who destroy themselves trying to keep on top of it. The best advice I've read on how to manage the situation is this by Tim Harford, but even obeying his rules only reduces the pain, but does not eliminate it.

Is there a solution? I've thought of one. It probably is impossible but I'm going to put it out there and see what you all say.

The idea is that there should be a cost to sending email. This seems weird for two reasons:  when email first came out we all loved it precisely because it was free: adding a cost seems perverse. Second, how on earth could it be made to work?

Well, suppose big organisations, such as Universities, could set up their systems so as to filter incoming emails and check whether the sender was registered. I assume that since filtering already occurs at some level for spam, this should not be impossible. If the sender is not registered, they get a bounce inviting them to open an account. Once they have an account, then a v small charge is made for each email that is delivered. The charge should be adequate to cover the cost of running the filtering and billing operation, but no more.

This could be arranged so that communications within a domain would be free, so it would not save us from mass communications from admin – but given that in my department most of these have recently been about the serious matter of closure of toilets, and even gender reassignment of toilets, perhaps that is as well. I can also envisage institutions have reciprocal arrangements so that all university domains, for instance, would agree not to charge each other. We would also need to be able to set up 'whitelists' of addresses that would be exempt from a charge: in my line of work we use email to communicate with volunteers and organisations who help our research, so we'd have to find a way to indicate that if we initiate the email exchange, the recipient is not charged for replying.

I've been trying to decide whether such a set-up would be good on balance, or whether it would create more problems than it would solve. There is no doubt that it would lead to an initial period of havoc, but it would wipe out spam at a stroke. The fear is that it could also prevent genuine and important messages getting through. Would I miss the opportunity of a lifetime to collaborate with a colleague, to go to a marvellous conference, or to take on an outstanding overseas student? The answer is probably yes, though, of course, if people were really unmotivated or unable to register, there is always snail mail.

Well, this is just an early morning thought, prompted by the daily routine of deleting the mass invitations to meet a sexy lady, deliver keynote at a conference on sludge disposal in China or be the recipient of a huge donation from a distressed oligarch. There must be a better way, but what is it?