David Heaton is, or rather was, a UK government tax adviser. And he has just resigned after being filmed explaining how the tax rules work and therefore how to work the system and minimise how much you get taxed.
And moreover he had the temerity to use the phrase keeping your money “out of the Chancellor’s grubby mitts”.
In truth, I suspect this is what most annoyed the powers-that-be: not acting as it the act of taxation was somehow a self evident moral thing rather than a threat based appropriation, and refusing to accept the notion that paying as little tax as legally possible is someone immoral. There are few things states hate more than people acting as it the state does not have morality on its side.
So yes, the Chancellor’s mitts are indeed grubby.
And although I am delighted David Heaton was pointing out ways to indeed keep money out of said grubby mitts, I am less glad he was suggesting milking the system to profit at the expense of other taxpayers rather than just avoiding the rapacious hands of the state… and as he made his money from HMRC, I will lose no sleep over him having to give up his taxpayer funded job.
I don’t think Mr Heaton will be short of alternative employment.
When the Gubbmint gives you something, you paid for it.
When the Gubbmint gives you something, someone paid for it… but a great many people who vote are in fact voting for themselves to be net recipients of other people’s money.
To paraphrase the Lieutenant of the Tower in the LotR ‘He who deals with Sauron does so on Sauron’s terms’.
I have not seen full details of what he was advising, but I understand that one was to pay bonuses so that they form part of Statutory Maternity Pay ‘SMP’. Large employers paying SMP can offset 92% of the cost of it against National Insurance contributions so I believe that what he was advising was how to maiximise the amount that could be recouped by ‘enhancing’ SMP.
Margaret Hodge: “This is an absolutely classic example of where government passes a law with a particular intent and the tax advisers then abuse that and use it for a purpose that was never intended by government.”
Poor, poor, misunderstood government. Why can’t the peasants just let Ms Hodge fleece them in peace?
I can’t be the only person who noticed the deliberate conflation of the terms “tax avoidance” and “tax evasion” in the last few years. The mean two totally different things, and yet in the last few years several very “on message” news outlets have taken to using them as if they meant the same thing.
Who’s to bet that this is part of a deliberate strategy thought up by some Downing Street press officer and spoon fed to several of his good friends on fleet street, all to justify a rapacious new tax grab and mass closing of loopholes. The general thrust of all this (best exemplified by the useful idiots of UK Uncut) is that, regardless of the stringency of the actual law, you have a moral duty to pay as much tax to the government as physically possible…..
Margaret Hodge
“Government” has no “intent.” the politician does.
AND – the purported “intent” is never the true and basic reason for an action (esp. taxation). Thus occurs what “was never intended.”
@Brian-
As I gather the sequence, Heaton was brought on board (from outside advisory practice) to consult with the revenue mandarinate on the whys anf wherefores off “getting around” or exploiting defective legislation and its administration.
He’s just returning to his patch.
One is reminded of the reason that Joseph P. Kennedy was named first head of the S.E.C. in the U S.
Someone is going to take Mr. Heaton’s place on the government payroll. Frankly, if I were a UK taxpayer I would prefer that he receive the salary rather than someone more philosophically inclined to maximizing the government’s take. We want more moles (Claire Wolfe’s term) within the government, not fewer.
Glancing briefly at the news reports, it doesn’t look to me as if Mr Heaton was a government employee. It looks like he was an ordinary private sector tax adviser co-opted onto a government panel to advise on tax avoidance. I imagine he kept his private sector job all along, and the panel was a once a month meeting at the offices of the dark side. I may be wrong, of course.
But anyway, if the government hires you – whether for a whole job or for a couple of hours a week – then they can fire you for any reason they like (I thought I’d put that in for fun, as it’s not a principle known to employment law.) So I have no problem with them firing him. They could fire him for saying something sceptical about climate change so far as I’m concerned. The poodle must not pee on the master’s leg. It’s not a government thing it’s an employer thing.
The real point of this though is that the government wants private sector tax advisers to tell them how best to write anti tax avoidance rules. They don’t have to take the advice, but they want to hear it, or at least to appear to be listening. Private sector tax advisers see some advantages in participating to try to persuade the government not to write rules with infinite administrative discretion. Over the past thirty years or so, the government has increasingly favoured infinite administrative discretion anti tax avoidance rules, because while there used to be lots of people in the Inland Revenue with old fashioned views about the rule of law, now it’s been converted into HMRC and fully Gramscied. By now, private tax advisers advising HMRC is entirely for show – the government pretends to be interested in the views of private tax experts, so as to give the impression of not being utterly anti-business, while private tax experts are willing to turn up to get early notice of the next bit of lunacy being planned.
True… and so what? My point is not that the state cannot fire him but rather drawing attention to why they did.
Perry,
When John Howard introduced the GST I tried to explain to the Labor goons at the pub that is was to fund schools and hospitals, their mindset was as they were free they didn’t need funding, never argue with idiots and as you say, some one has to pay in the end, which is a flaw in democracy, vote for largess that some one else pays for.
@JV: I was under the impression that the distinction between “tax avoidance” and “tax evasion” is particular to the US, and that some countries — maybe including the UK — have made illegal any attempt to avoid taxation. And even in the US the distinction seems to be headed for obsolescence (FATCA being an example).
Indeed, I suspect that the strongest proponents of continuing both the War on Drugs and the War on Terror are officials who use both as excuses to pry into people’s finances — because they know that without “money laundering” as an excuse, the people would demand, and get, strong enough privacy protections for their banking activities that taxes of the levels we now pay would be mostly impossible to collect.
jdgalt,
Tax evasion is an offense. Tax avoidance is a shorthand term for stating that someone has arranged their finances so as to legally minimise their tax liability. To make tax avoidance illegal is to declare that people have a legal obligation to pay more tax than they are legally obligated to pay…
Huh?
Everyone with any financial sense engages in tax avoidance as a matter of course. Every time you claim a deduction of any sort you are avoiding tax.
Counting Cats,
Tax evasion is an offense – so the 13 colonies rebelling against Britain was illegal?
America is built on tax avoidance.
Tax evasion is, as you say, an offence. The purpose of a tax anti avoidance rule is not to create an offence, but to make the attempt at tax avoidance ineffective. Thus suppose there’s a tax rule that says
“If A sells a diamond to B, A must pay 10% of the sale price as a tax. This rule does not apply to sales contracted outside the UK.”
Suppose A and B, both British living in the UK, decide to take the Chunnel to do their diamond deal in France. In the olden days, they’d have been fine. More recently the courts might have said “Even though as a matter of contract law, they contracted in France, bearing in mind the purpose of the statute which we are able to discern, even though it is not explicitly stated, “contracted” in this rule does not take its contract law meaning, but means something else. It is intended to exclude artificial arrangements whereby the essential agreement is made in the UK, but artificial steps are taken to make the formal agreement outside the UK. Consequently for the purposes of this tax rule, the parties contracted in the UK and the tax must be paid.”
But then again the court might not say that. Judicial attempts at anti tax avoidance require varying degrees of sophistry, and occasionally if it is left to the courts the taxpayer might win. (Though increasingly rarely.) Besides it is pretty expensive, in both time and money, to go to court, and HMRC doesn’t have unlimited resources. So it’s nicer to rewrite the rule thus :
“If A sells a diamond to B, A must pay 10% of the sale price as a tax. This rule does not apply to sales contracted outside the UK, unless artificial arrangements have been made to avoid this tax by contracting outside the UK.”
This rule is more reliable for HMRC, than trusting the courts to think up something, and it puts the onus on avoiders to show that their arrangements weren’t artificial, or weren’t aimed at avoiding the tax. The new rule is obviously much muddier than the old one, is more intrusive on individual liberty (requiring an enquiry into the taxpayer’s purposes as well as his deeds) and leaves much more scope for administrative discretion, but it isn’t telling people that they owe more than they have a legal obligation to pay. It’s defining what their legal obligation by reference to concepts like artificiality and purpose, in addition to gains and losses.
Here is a summary of the classic historic UK case on tax avoidance from 1935, with a summary of the principle, now dying, that the discretion of the bureaucrat is abhorrent.
http://swarb.co.uk/inland-revenue-commissioners-v-duke-of-westminster-hl-1935-2/
I am disturbed though not surprised that Private Eye was involved in the investigation. Boy, have they gone downhill.
Private Eye was the originators of the entirely made up £6bn Vodafone tax bill, which was seized on and repeated by the Left despite being bollocks. At the end of the day, Private Eye is still made up of them same Oxbridge establishment-types as the rest of the media, only – like the Economist – they wish they were the ones allowed to tinker around the edges. Liberal they ain’t.
Well at least the estimable Mr Tim Martin of the Wetherspoons pub chain in the UK is vocal about tax destroying businesses.
http://www.express.co.uk/finance/city/429246/Wetherspoon-in-good-cheer-despite-tax
Private Eye also takes the established line on global warming.
Under the doctrine of “Social Justice”, which both Mr Cameron and Mr Osbourne say they believe it, all income and wealth is rightly owned by the collective (it is an ownership claim – that is why it is a matter of “justice” not “charity”), to leave income and wealth in the hands of private individuals or private organisations is only “justified” if there is some “social benefit” for “the people” in doing so. See in this light the words (and the deeds) of David Heaton are outrageous – he helps people keep more money than the government thinks it is socially useful that they have, and even boasts of his anti social conduct (rather than showing rightful shame for violating Social Justice).
This is a similar situation as in the run up to the French Revolution – many of the most wealthy people in the Realm (and Mr Cameron and Mr O. and so on are very wealthy – born wealthy and married money) believed in doctrines (and even subsidised doctrines) that if-taken-to-their-logical-conclusions can only lead the plundering and murder of “Citizen Equality” (as the Duke of Orleans, the most wealthy man in France, called himself) and the others. Backing the forces the forces of Social Justice (and the Duke of Orleans even backed the murder of his own cousin – King Louis XVI a gentle man who has shown the Duke nothing but kindness) did not save them – and did claims that their individual wealth was indeed “socially useful” and that their private wealth really was for “the good of the people”.
Once private property is put to some sort of “social test” (having to be “justified”)then all is lost. For the MORAL PRINCIPLE (the definition of “justice” itself) has already been conceded – and those driven by envy will not accept that any private wealth is “socially useful” (if anyone doubts this – let them mention “the Koch brothers” and look at the face of the political person the words “the Koch brothers” are mentioned to). The wealth of the wealthy will be redefined as “stolen” or otherwise illegitimate (using some absurd excuse) – even many so called “libertarians” do this.
Perhaps it is vain to point out all of the above (after all the Duke of Bedford did not understand the “Letter to a Noble Lord” that Edmund Burke wrote to him – pointing out to the Duke that his support of the doctrines of the French Revolution could lead to the destruction of himself and his family). Sadly people seem unable to learn by examples.
For example the Channel Islands reacted to seeing the madness of “deposit insurance” (government welfare for those who entrust their money to banks who go bankrupt) by adopting it, and the Channel Islands (this very week – even in Gurnsey) are busy reacting to the terrible results of “employment legislation” in every country that has adopted this idea (mass unemployment causing Social Justice “rights” at the expense of private employers) by ADOPTING EMPLOYMENT LAWS.
Yes, as Perry would say, this is Paul Marks in full “suicide note” mode.
If asked to make “practical recommendations” – I am in no mood to do so (because gradual reform has no chance what-so-ever), so I will (as an historical curiosity) simply repeat ancient conservative demands (forgotten by most modern people who call themselves conservatives).
The Monarch should “live off their own” (the profits of the Royal Estates) with no peacetime taxation. And “the law” (the Common Law principle of non aggression against the lives and goods of others) should be respected – no “legislation”, no “laws” based upon arbitrary whims (“giving people rights” or “trying to do good”).
Regional, the 13 colonies rebelling against Britain was most certainly “illegal”. Had it failed the ringleaders would have been hanged for treason. Only winning is what made it “legal” (or, at least, non-punishable). Whatever made you think otherwise?
And CountingCats’ description of the legal distinction between tax evasion and tax avoidance is precisely correct.
Laird – as you know, that depends on what view one takes of law.
If one holds (as a Legal Positivist does) that Parliament (or any legislature) can do whatever it likes – can produce law in the way factory produces tins of baked beans, then indeed the actions of 1776 were “illegal” (as was the revolt of 1215 also – and the oath of Henry the first in 1100 to obey the fundamental laws was meaningless as the “law” was, by this view, whatever he said it was).
However, if one takes the point of view of law that the Founders in 1776 took (or that Hampden took in the 1600s, or was taken by the men of 1215, or was understood in Henry’s oath of 1100 – or was accepted by the Edict of Q. in 877 – that even a King of France could not take a fief of land from one family and give it to another) then “law” has a fundamentally different meaning.
Contrary to Maitland (and other vermin) the two views can not be reconciled.
One can not be a Hobbesian and a supporter of the fundamental principles of law – of limits on government power.