HMRC launches pre-emptive strike

HMRC sent letters directly to 1,500 people who have signed up to one particular avoidance scheme, urging them to pull out and contact the authorities about their tax affairs.

The letters, thought to be the first of their kind, are seen as a pre-emptive strike by the taxman prior to a legal challenge to the as yet unspecified avoidance scheme. Among the suspects are loss making film partnerships, or the K2 scheme reportedly used by comedian Jimmy Carr.

Continued...

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Worrying trend    2 thanks

Ubergeek | | Permalink

How is it that HMRC feels able to leak so much information to the press, including now some of the wording used in the letters issued?

Are these letters enquiry letters, or do they serve another purpose?

There are rumours that they also leaked names of individuals connected with some of the schemes mentioned in the Times in summertime. If this is proved to be true, surely criminal proceedings will be brought. This is a very dangerous game that they have embarked on!

ShirleyM's picture

Why is it worrying?    7 thanks

ShirleyM | | Permalink

Rumours are only rumours until something definite is revealed. HMRC must spend a massive amount of taxpayers money (those who DO pay tax) bringing these cases to the courts.

I always think that prevention is better than cure, so if these letters and the publicity gets a few 'taxpayers' actually paying some tax then all well and good.

 

Oh dear!    4 thanks

ThornyIssues | | Permalink

ShirleyM wrote:

Rumours are only rumours until something definite is revealed. HMRC must spend a massive amount of taxpayers money (those who DO pay tax) bringing these cases to the courts.

I always think that prevention is better than cure, so if these letters and the publicity gets a few 'taxpayers' actually paying some tax then all well and good.

So you endorse paying the maximum amount of tax due do you? You don't mitigate your client's liabilities at all or do you actually provide advice to clients suc that they avoid tax/NICs (they do use dividends to avoid NICs don't they)? This "hollier than thou" attitude is laughable. I'll wager that HMRC are trying it on with a scheme that is actually legal - albeit immoral is some eyes.

So, HMRC is going to be given £154M to <removed> up against the wall to "challenge in court", those who are doing nothing illegal! Judges are now going to adjudicate on the morality of avoiding corp tax are they?

 

We are now in an "image war"    1 thanks

Eric T | | Permalink

We are now in an "image war" situation. HMRC is trying to save face in an effort to cover its inadequacies.

 

HMRC should just got their heads down and do the work they should be doing - instead of leaking snippets of information (and possibly disinformation) to the media. 

billgilcom's picture

Why not

billgilcom | | Permalink

Why don't HMRC get a Full Page spread on the front of all daily newspapers and a prime slot of the telly advertising their drive on aggressive - oops your view of agressive might not be mine (or HMRC's) - tax avoidance and then when they go forward for either civil penalties or even prosecution there can be little doubt left that any reasonable taxpayer should have approached HMRC to ensure that their affairs were in order but decided to Deliberately Default and can subsequently be named and shamed legally

Big Brother strikes again!!!

bill@wamstaxltd.com

www.wamstaxltd.com

 

The classic distraction    3 thanks

ThornyIssues | | Permalink

While everyone's getting heated about companies not paying the maximum tax according to HMRC and MPs, they're not noticing that MPs are still lining their pockets at the taxpayers' expense and that for years, HMRC have been using off-books PSC contractors and are renting a large proportion of their accomodation from an off-shore company in a tax haven.

   

"Hollier than thou" - very festive!    4 thanks

dwgw | | Permalink

ThornyIssues wrote:

ShirleyM wrote:

Rumours are only rumours until something definite is revealed. HMRC must spend a massive amount of taxpayers money (those who DO pay tax) bringing these cases to the courts.

I always think that prevention is better than cure, so if these letters and the publicity gets a few 'taxpayers' actually paying some tax then all well and good.

So you endorse paying the maximum amount of tax due do you? You don't mitigate your client's liabilities at all or do you actually provide advice to clients suc that they avoid tax/NICs (they do use dividends to avoid NICs don't they)? This "hollier than thou" attitude is laughable. I'll wager that HMRC are trying it on with a scheme that is actually legal - albeit immoral is some eyes.

So, HMRC is going to be given £154M to pi$$ up against the wall to "challenge in court", those who are doing nothing illegal! Judges are now going to adjudicate on the morality of avoiding corp tax are they?

 

No, judges will adjudicate on whether a scheme is legal, as they have always done.  Do you not understand how this works?  I trust you'd advise any clients investing in avoidance schemes that, whilst a given scheme might be lawful now, it remains open to interpretation (just as those devising the scheme have done).  Tax law evolves through the actions of the judiciary, as well as the executive and legislature.  It doesn't stand still and nor should it. 

Tax avoidance schemes exploit unintended loopholes in legislation, through a partial interpretation of that legislation.  It's curious to hear the shrill protests of those engaged in such schemes when the law is interpreted differently, as if the law should be set in aspic and it's somehow immoral for it ever to be changed - or at least not until they've got their own scheme away. 

Four letters all slightly    1 thanks

TROGGY | | Permalink

Four letters all slightly different in composition as they seek to shake the tree, but this looks more and more like a department that is now prepared to try almost anything to recover face.

The early indications I have had is that copies of the letters are not being sent to the authorised agent, which is quite staggering. 

 

 

Guilty before any charges brought?    5 thanks

Ian McTernan CTA | | Permalink

This latest effort by HMRC smacks of convicting people before any charges have been brought.  I'm not a fan of tax avoidance schemes of the highly artificial type, but this can be fixed by bringing in the right anti-avoidance legislation.

Imagine receiving a letter from the DVLA saying your license has been revoked as they feel you might commit some driving offences, or you queried a speeding offence so it is likely you will commit another so they are removing your license now.

It's not clear on what basis HMRC can issue these letters before even challenging whether a scheme is legal or not and asking people to pay up or refusing to make refunds on the grounds that they don't like the scheme- wonder how long before a refund is refused and a legal challenge in the ECHR is raised...

What we need is some clear legislation and a less complex tax system with a good simple anti avoidance rule- but cutting down on the huge mess after years of the great tinkerer's efforts would take more willpower than anyone has shown thus far.

Harassment?    6 thanks

The Black Knight | | Permalink

Surely such letters are just harassment?

but one must read as "we do not have the resources and do not think we can succeed in a court of law therefore we have resorted to more dubious pressure techniques"

Surely the sensible legal and ethical way would be to prove the scheme did not work then write to taxpayers informing them of such.

If HMRC expects taxpayers to behave in an ethical fashion then it should look towards itself to behave in such a manner so as to set the standard.

HMRC Property Offshore    3 thanks

jamesashburton | | Permalink

Not just renting from offshore companies but from companies to whom they sold the property in the first case and then leased it back again. When pressed by MPs the heads of Inland Revenue and Customs & Excise claimed that they had done nothing wrong as it was all done for commercial purposes. Did they ever get investigated for this and if so who by?

Big Brother indeed    5 thanks

DMS | | Permalink

I have seen the letters, and believe me they are appalling. It is bullying of the worst sort, in a way which would have been seen as disgraceful not so long ago. Now it seems anything is acceptable for a governemnt desperate for cash. It is the tactics of the mob.

They are full of inaccuracies (in fact they are almost devoid of accuracy) and threats, on structures that have yet to be tested in the courts. I am well aware of similar structures in the past that HMRC have not bothered to litigate after looking at it closely, so draw your own conclusions. That is why they are attempting this pathetic moralising and posturing in public.

Innocent taxpayers are being told to pay up or face severe consequences, without any regard for due process. In fact, should any liabilities arise from the structure they would not fall on the very people being threatened, so these letters are simply acts of intimidation.

This country is becoming a police state, and those who defend such practices on the grounds of fairness to other taxpayers are sleepwalking down a very dangerous path. If it works, legislate. If it doesnt, litigate. But the carrying out of such aggressive marketing through a stupd and supine press before either of these avenues has been taken is the sign of a morally bankrupt government.

And I can tell you now that the tax at stake is tiny. In a parliamentary debate about welfare savings, Iain Duncan Smith complained that concentrating on £100m was obsessing about immaterial marginal sums, and the tax at stake here is less than 1/3 of that. Then go and look at the MPs working their way out of paying CGT on second homes. Hypocrites the lot of them.

It's not paying the maximum    2 thanks

rodleee | | Permalink

It's not paying the maximum amount of tax that's the problem, and putting up a straw man doesn't really advance the debate.

Maxing out legal loopholes clearly is a problem, it brings the whole system into disrepute.  If democracy works, this should bring about firstly a change in the enforcement of the law by HMRC, and secondly, if that doesn't work, a change in the law.

As for morality vs legality

Robert Burns had it right 200 years ago:

"The fear o Hell's a hangman's whip to haud the wretch in order;

But where you feel your honour grip let that aye be your border:"

Efficient use of limited resources    5 thanks

michaelblake | | Permalink

This strikes me as a very efficient use of limited resources and as a taxpayer, and a practising tax advisor who dislikes aggressive avoidance schemes, I applaud it.

I personally find it very easy to distinguish between acceptable tax planning and aggressive avoidance schemes that promise (for example) a maximum rate of tax of 10% on any, and all, professional earnings via complex overseas structures as more than one firm in the market place is doing at the moment. 

Of course there will always be a debate about where the boundary between acceptable and unacceptable tax planning should be (and perhaps like Australia we should put a statutory definition on that) but it is very easy to identify examples at the extremes.

 

Bit of an overreaction here    5 thanks

dwgw | | Permalink

We have an adversarial legal system.  What's so bad about HMRC reminding certain people of that fact?

From its reported contents, the letter simply repeats the warnings that any reputable firm engaged in marketing avoidance schemes should have given to its clients from the outset.

If a taxpayer is surprised to receive advance warning of investigation and closer attention from HMRC, then those profiting from selling the particular scheme haven't done their job properly.

Only the badly advised taxpayer should find the letter alarming - there shouldn't be anything new in it and, if there is, they should be thankful they got the warning before the investigation/court case began. 

Caveat emptor.

Crackdown on Tax Avoidance    3 thanks

quadra | | Permalink

I have no problem with HMRC cracking down on tax avoidance - indeed I support it - as long as it is done fairly.

In at least one case (S.58 Finance Act 2008) retrospective legislation has been used to tax income in a TA scheme which HMRC knew about for years and did nothing. (see http://notoretrotax.org.uk/)

This is wrong - individuals have the right to use legal means of mitigating taxation. HMRC should make a clear statement that any particular arrangements believed to be unacceptable will be challenged, and they should seek to collect tax from the date of challenge. If through reasons of inefficiency, indifference, or plain error they do not challenge a scheme it should be allowable up to they point that HRMC does challenge it.

I believe its known as human rights. I'm sure I read that in a book somewhere...

Nick Graves's picture

Just a normal covering letter?    1 thanks

Nick Graves | | Permalink

It is now considered usual for any letter form HMRC to be so full of veiled threats, completely irrevelant paragraphs and fighting talk that the actual point of the communication is frequently lost in the diatribe.

Last one we had regarding a queried refund had some gibberish about registering seven working days for online filing before the SA deadline - we'd already filed the '12 SATR electonically using our software and as agents, we know that already. What was the point of including it?

It's a wider point, but it's symptomatic of their arrogance and detachment from reality in dealing with the real world. It's as if they're the world's most officious, bureaucratic protection racket sometimes.

 

 

 

 

 

Bullying without backup

BryanS1958 | | Permalink

HMRC clearly lacks the resources to successfully challenge the majority of tax planning, so they are hoping that they will scare taxpayers with a few cheap to produce letters rather than going to court and actually proving that the tax planning doesn't work!

johnjenkins's picture

Don't forget    1 thanks

johnjenkins | | Permalink

in order to make £154M available to HMRC to go after the big boys, they first have to get it from us littluns. So be prepared for ARSE (Adequate records system experience) penalties galore.

the boundary between acceptable and unacceptable tax planning    5 thanks

DHillside | | Permalink

Call me old fashoned (I have been a CA since 1981) but in my mind its 'acceptable' if its legal. It is not for me as a professional accountant to moralise or decide for my clients what is 'fair' - I just give them choices and explain the relative risks of THEIR options. If I have to consider morals I'll throw out my Tollys books and replace them with a Bible.

the right to order your affairs    2 thanks

coalface | | Permalink

Quite where you draw the line between not paying too much tax and agressive avoidance will always be a matter of opinion - but remember that the Greek people didn't like to pay tax, and look at the unholy mess that country is in...

 

Nothing has changed    2 thanks

geoffwolf | | Permalink

Surely there is nothing wrong with legal tax avoidance (including all taxes) not just IT, CT, IHT, VAT,,SDLT and so structuring a transaction that the least amount of tax is payable. However,as I understand the situation, if the only purpose behind a transaction or series of transactions is to reduce the amount of tax that would otherwise be payable then it is likely to be ruled as unacceptable in court.

Presumably a large number of registered tax avoidance schemes could fall into this trap.

ShirleyM's picture

There should be give and take    11 thanks

ShirleyM | | Permalink

I have no problem with low earners not paying tax. I do have problems with high earners paying scheme providers to ensure they pay a miniscule amount of tax (much less than the lower earners), while still enjoying the benefits provided by the tax collected from people who earn much less, but who don't have the option of using K2 (for example) even if they wanted to.

These schemes are not true tax-planning. They exploit loopholes in the law. The ensuing legislation will be yet another cost to the country, and will add another complexity that will catch the innocent along with the guilty. So not only do they deprive the country of tax, but they add to the legislative burden.

My letter would have said something like: If you want to live in the UK, and earn a very good living from the UK, then you should contribute towards the upkeep of the UK. If you don't want to pay UK tax, then b*gger off somewhere else and don't come back when you want to collect your pension or need a major operation.

Indeed

ThornyIssues | | Permalink

johnjenkins wrote:

in order to make £154M available to HMRC to go after the big boys, they first have to get it from us littluns. So be prepared for ARSE (Adequate records system experience) penalties galore.

Good point, well made!

 

Reminders should not be necessary

ThornyIssues | | Permalink

dwgw wrote:

We have an adversarial legal system.  What's so bad about HMRC reminding certain people of that fact?

From its reported contents, the letter simply repeats the warnings that any reputable firm engaged in marketing avoidance schemes should have given to its clients from the outset.

If a taxpayer is surprised to receive advance warning of investigation and closer attention from HMRC, then those profiting from selling the particular scheme haven't done their job properly.

Only the badly advised taxpayer should find the letter alarming - there shouldn't be anything new in it and, if there is, they should be thankful they got the warning before the investigation/court case began. 

Caveat emptor.

We shouldn't have an adversarial tax system that seeks to create and defend the use of vague and woolly tax laws in the first place such that it can use strong-arm tactics via the legal system that attempts to scare taxpayers into paying what HMRC deems the "right amount of tax". The system should be clear and unambiguous. Hopefully we will see this come about as a result of the current fracas.

 

Big Brother and The Godfather too!

ds | | Permalink

Heard some talk on the radio today about HMRC having a cosy chat with the likes of Amazon, Starbucks and Google to pay at least some corporation tax in the UK. Come on be good chaps now !

Here we are talking millions of quid and big hits in a few large US tax avoiding corporations, but they have access to high powered and expensive legal teams who know how to play the system, Joe Bloggs down the road doesn't have this and so are an easy target to be looted.

However it makes good PR for HMRC to be seen to be actually doing something but whether Uncle Sam's tax avoiders will be extradited, tried in a UK court and pay up back tax, well I'm not holding my breath on that one. Also the TV licence people send out similar threatening letters to punter's homes where they don't have a record of a TV licence, whether or not they actually own a TV. The tactics of the mob indeed.

ShirleyM's picture

@ThornyIssues    6 thanks

ShirleyM | | Permalink

You make it sound so simple to write laws that are clear and unambiguous, but it is extremely difficult. Even a straight forward 'You will pay tax on earnings' would be open to abuse.

Which came first ... the chicken or the egg? The reason the tax law is so complicated is because some people use it in a way never intended, and the law then has to change to close that loophole, and so it goes around and around.

johnjenkins's picture

Tax Laws

johnjenkins | | Permalink

can be made simple. Governments choose not to so that they can then wield "right amount of tax" If legal is in their favour then that is the "right amount". If legal is not in their favour then it's not the "right amount".

How many Estimated Assessments have been forced through on legalities even though the money hasn't been earned. How many times have we heard that CIS tax cannot be offset because of time constraints

If we gonna have a fair playing field let's have one for everyone. If you earn money in this country you pay tax on it with no time constraints (either side).

If something is artificial it's evasion not avoidance. Now what is complex about that?

The irony!....    2 thanks

fbc | | Permalink

I'm not sure if anyone has bothered scrolling to the bottom of this page, but there is a sponsored ad link...

Take home 90% of your pay

IT contractor working in the UK? Take home more pay with us.www.choicepremier.com

 

Oh how I laughed, thanks Accounting Web for putting some humour into an otherwise depressing thread! 

 

Choice Premier, you better get your running shoes on!!

 

 

Irony

TC2 | | Permalink

I love fbc's sense of humour.

But, seriously ... I'm a straight-forward, honest accountant trying to help my clients LEGALLY AVOID tax.  What is the basis of Choice Premier's scheme?  How can it be legal at all, even with loopholes?  I asked for an example, but it made no sense at all to me.  How can tax be zero on over £100,000?

From Ignorant of Agressive Schemes.

 

Gross simplification required of Taxation System

philfromleeds | | Permalink

I feel that the reason why all these avoidance schemes exist is because the taxation system has become too complicated. The avoidance schemes take advantage of the complications that exist.

In a simple world you pay your tax on the profit you make. As Alexis say's SIMPLE.

The Institute of Taxation and the Tax Faculty of the Chartered Accountants have a vested interest in matters being complicated. A perfect tax system would see all these tax experts unemployed.

The HMRC should come to me and make me a consultant to simplify the tax system. I would want it easy to understand. Infact my brainpower could be used as the benchmark in the understandability stakes. The spinoff would be no avoidance shemes would work. You make a profit and you pay the tax.

Butterworths CCH Bloomsbury etc would all go out of the tax business.

 

And what will they do with all this extra tax?

HLB | | Permalink

WASTE IT!!!!!!!!!!!!!!!!!!!!

 

 

johnjenkins's picture

It's a pity

johnjenkins | | Permalink

HMRC didn't include in their letters that the likes of starbucks etc. shouldn't hit employees benefits, tea breaks, sick pay etc. to pay for this new tax coming forth from them.

Can't agree

ThornyIssues | | Permalink

ShirleyM wrote:

You make it sound so simple to write laws that are clear and unambiguous, but it is extremely difficult. Even a straight forward 'You will pay tax on earnings' would be open to abuse.

Which came first ... the chicken or the egg? The reason the tax law is so complicated is because some people use it in a way never intended, and the law then has to change to close that loophole, and so it goes around and around.

I know it is not easy and I never said it would be but it is not impossble. It takes thought and in particular, a lot of thinking about the laws of unintended consequences. Would you not prefer that to the current HMRC modus operandi of insisting on as a wide a net as possible (see their responses in the GAAR debate)  and then either burning taxpayer money defending their stance or conversely burning taxpayer money by fending off challenges by taxpayer. That to my mind is simply mad .... and wrong! The only way things will improve is to enlighten both the public and the powers that be to the current situation and force change through exploiting their vague and woolly laws. 

 

ShirleyM's picture

Can't agree either    1 thanks

ShirleyM | | Permalink

ThornyIssues wrote:

ShirleyM wrote:

You make it sound so simple to write laws that are clear and unambiguous, but it is extremely difficult. Even a straight forward 'You will pay tax on earnings' would be open to abuse.

Which came first ... the chicken or the egg? The reason the tax law is so complicated is because some people use it in a way never intended, and the law then has to change to close that loophole, and so it goes around and around.

I know it is not easy and I never said it would be but it is not impossble. It takes thought and in particular, a lot of thinking about the laws of unintended consequences. Would you not prefer that to the current HMRC modus operandi of insisting on as a wide a net as possible (see their responses in the GAAR debate)  and then either burning taxpayer money defending their stance or conversely burning taxpayer money by fending off challenges by taxpayer. That to my mind is simply mad .... and wrong! The only way things will improve is to enlighten both the public and the powers that be to the current situation and force change through exploiting their vague and woolly laws. 

 

We'll have to agree to disagree. Legislation is a little like a competition. On the one side there are the lawmakers, and on the other side there are the tax professionals that try (very hard!) to find the little chink in the armour. It is a battle of wits. It is impossible for anyone to predict how someone else will interpret a set of words, and this is how lawyers and co. get their extremely high fees, by putting a different interpretation on things. It is easy to say it should be done, but not so easy to do it. It is a little like asking someone to predict the future .. with 100% accuracy!

basics

tedbuck | | Permalink

Actually where did HMRC get these names from? Were they declared schemes on tax returns or is this another leak from a 'whistleblower'.

Automatic enquiries on 'schemes' is what is advised by their promoters so if they are declared no-one should be surprised at receiving the letters but the suggestion is that these letters are warning punters. Something funny here?

If the schemes have to be registered with HMRC surely HMRC are in a position to proceed quickly against them if it doesn't like them so why don't they? How about an HMRC blog on 'schemes we're gunning for'?

As an observation for Georgie Chancellor and his rapacious L-D string pullers does he not realise that the higher the taxes the more the incentive to avoid them? How many millionaires are said to have left the Country already?

 

cap on tax paid??

quadra | | Permalink

The kind of pre-emptive strike the Chancellor needs to make is to cap the amount of tax paid by any individual at £500,000 in any one tax year.

Can you imagine the boost that would give to the economy? The tail would stop wagging the dog, investment & growth would flood to the UK, and the resultant tax revenues would solve all our fiscal problems!

Ah well, back to reality... a penny on stamp duty & stifle the market further Sir?

ShirleyM's picture

Easy peasy solution    1 thanks

ShirleyM | | Permalink

quadra wrote:

The kind of pre-emptive strike the Chancellor needs to make is to cap the amount of tax paid by any individual at £500,000 in any one tax year.

Can you imagine the boost that would give to the economy? The tail would stop wagging the dog, investment & growth would flood to the UK, and the resultant tax revenues would solve all our fiscal problems!

Ah well, back to reality... a penny on stamp duty & stifle the market further Sir?

I am sure many high earners could arrange things so that they take a whacking great pay packet in one year (5 years pay in 1 go?), and then live off it for the next 4 years, and then rinse & repeat. 

that's exactly what we want

quadra | | Permalink

that's exactly what we want them do do - get the money into the system & get growth going. On an ongoing basis all profits made would be delivered direct to the economic jugular!

What's your alternative? that they pay fees to shelter it all offshore & we get no benefit at all?

ShirleyM's picture

In that case ....    1 thanks

ShirleyM | | Permalink

.... why does anyone pay tax ... why not leave it all to go into the economy?

What makes you so sure that the high earners would put the 'saved tax' into the UK economy and not just squirrel even more away in offshore accounts, or spend it on foreign properties, etc?

johnjenkins's picture

@ShirleyM

johnjenkins | | Permalink

There actually is a good case for not paying any tax. Or very little. How much is wasted on MP's and Euro MP's etc. Do we really need all this crap. All we NEED is health and defence. There is no reason why the rest cannot come from private enterprise and competition. Let's face it the supermarkets cope very well and that is feeding us.

Game Over UK

ds | | Permalink

After Gideon's budget speech yesterday and the fact the Govt is not reducing the deficit by any degree and that the ecconomy is actually shrinking, who can be in any doubt that the absurd merry go round is coming to an abrupt halt.

 

We can look forward to more wars of aggression to loot other countries wealth and examples such as this thread to screw hard working tax payers even more leaves me in no doubt as now is the time to leave this knackered old country as it's glory days are gone and never to return. You will be robbed blind if you stay.

ShirleyM's picture

@john

ShirleyM | | Permalink

So ... no tax gets spent on civil servants, hospitals, schools, police, emergency services, etc.?????

The biggest part of tax collected goes straight back into the economy. Yes, there is waste, but what is considered wasteful differs from one person to another. Doing away with tax would be cutting off your nose to spite your face.

A 'voluntary' system would be a non-starter. The greedy selfish people would keep as much for themselves as possible, and at the expense of the caring people who have a social conscience ... in fact this is pretty much the state we are in now with all the tax-dodging.

I wish all the tax-dodgers would go live in Greece for a while, so they can see for themselves the results of tax-dodging.

 

johnjenkins's picture

@ShirleyM    1 thanks

johnjenkins | | Permalink

I did say health and defence and really you don't need politicians to run them.

There is not that much tax dodging. There is certainly evasion but really when you look at it it's nothing to do with the taxation system. If a painter and decorator does a "private" at weekends for a mate, gets £200 and doesn't declare it, how does that effect the government? It doesn't, because they shouldn't be relying on that "extra" money anyway.

We have a situation where governemnt is spending more than it's getting in and trying to blame it on everybody else apart from their bad management. Just imagine any business or householder doing that.As Greece will find out bankruptcy is the only answer.

So why don't all the countries just write off all debt and start with a clean sheet but budget on what you know is coming in not what you would like, or think should, come in

the essence...    1 thanks

quadra | | Permalink

the essence of the ussue is that whatever you spend it on you need to raise it forst, and you do that by encouaging capital investment in a favourable tax regime.

if you understand this then no further explanation is necessary. If you don't, then none is possible.

Game Over UK - the outlook doesn't have to be bleak, but I agree that the present approach to taxation will only serve to drive the rich away & leave the less well off without a significant part of the tax take.

never mind... more tea anyone?

Governments aren't meant to be businesses    2 thanks

dwgw | | Permalink

A government spending more than it's getting in?  That's been true of almost every government in almost every era.  It's a government, not a business.  It's meant to do things differently. 

The debate has unfortunately been hijacked by those infected by a Thatcherite cornershop mentality, to the detriment of all of us. 

Just compare the terminology used.  It's always "public spending" but "private investment".  Pension saving requires tax "incentives" and "reliefs" paid for by the rest of us taxpayers.  No mention of subsidies or benefits.  On the other hand, low wage earners receiving tax credits are "on benefits" which, in reality, are a form of incentive to take on low paid employment (and so subsidise the employer).  But the former is taken to be a reward for hard work and prudence, while the latter is seen by many as little more than scrounging.

There wouldn't have been much public spending in the middle ages but some of us like to think we've progressed a bit since then. 

     

johnjenkins's picture

Quite true Governments    1 thanks

johnjenkins | | Permalink

aren't business and do things differently but should do so only within their means.

If you really want a Thatcherite position how about this.

You can put everything wrong with our economy and culture when the Tories got rid of Maggie. Why did they get rid of her? because she got things done. The poll tax was a great idea, yes make working18 year olds pay their way. There wouldn't be as much binge drinking and the associated costs. That also stopped our police of having any say in how they stop riots etc. You only have to look at last years riots to see what I mean.

Once she was got rid of the "feel good" factor went. Yes she destroyed some of our manufacturing industry but most of it was going to go anyway. She really did have an insight as to the future.

So what's the answer? An all party coalition? There doesn't really seem to be a politicain in Europe with any umph. Perhaps we should do what the football teams do and go outside of England for a Prime Minister. Not so daft as you might think.

Nick Graves's picture

Neo-Keynesian brainwashing    1 thanks

Nick Graves | | Permalink

is responsible for such attitudes.

It's become politically correct for all parties to think big Gov't/Nanny State is responsible for providing people with a living.

Time & time again, the 50% rule comes into play; once the public sector/tax rates hit that sort of level, the private sector cannot compete with the public sector and thus produce enough tax revenues to support borrowing. The public debt then spirals rapidly out of control, whilst the Gov'ts try to hyperinflate out of trouble, with not-so hilarious consequences.

It's happened time after time after time and this time it isn't different, however much empirical evidence is ignored.

It's true; Mrs T. (and Vaclav Klaus) understood this and famously followed the Austrian school and showed some hard-won success in balancing the books - a bit. There are a few honourable enough to admit the truth, but they are soon pushed aside.

But neo-Keynesian drivel is appeals to politicos promising stuff they can never pay for, to buy votes, so the voices of reason has been deemed politically incorrect and is shouted out. Of course this far in, there is only once course of action until the debt becomes insurmountable. Their is a tiny ideological difference in that one lot will create non-jobs in the public sector for their cronies, whilst the other lot will try to create free(r) market benefits/tax cuts for their cronies.

Until the current two-(one)party pretend-democracy is broken, it won't get fixed. That will only happen when the blinkers come off hoi polloi, eventually. 

Ultimately, the economy IS a business and ought to be balanced, otherwise it will always end in collapse. It IS the economy, stupid. Clearly, polyingticiunts cannot be trusted to do this.

 

 

 

 

 

 

 

 

 

 

 

Fees before morals    1 thanks

rodleee | | Permalink

dcolom wrote:

Call me old fashoned (I have been a CA since 1981) but in my mind its 'acceptable' if its legal. It is not for me as a professional accountant to moralise or decide for my clients what is 'fair' - I just give them choices and explain the relative risks of THEIR options. If I have to consider morals I'll throw out my Tollys books and replace them with a Bible.

...maybe you should read the bit about Pontius Pilate washing his hands!  It's one thing for a defence lawyer to be blind to the morals of the case, but quite another for all professionals to be amoral.  You are also wrong on the "old fashioned" bit: whilst professional amorality is not a new phenomenon, it is only recently that it is advocated as mainstream.  Fortunately, most professionals are still choosy about the courses they recommend to their clients.

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