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Osborne shocked by millionaire tax avoidance

10th Apr 2012
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Chancellor George Osborne has expressed shock after looking at 20 anonymised tax returns of multi-millionaires who have exploited tax loopholes to legally reduce their tax bills.

The move could be considered political posturing after a tough couple of weeks for the coalition over the ‘granny’ and ‘pasty’ tax furores; however, it does prepare the ground for the anti-avoidance law consultation that was announced in the Budget.

After being shown the returns by HMRC, Osborne is now convinced that millionaires must pay a minimum rate of tax equivalent to about a third of their earnings, or a ‘tycoon’ tax.

He told The Telegraph:

“I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.

I’m talking about people right at the top. I’m talking about people with incomes of many millions of pounds a year. The general principle is that people should pay income tax and that includes people with the highest incomes.

I’m not allowed to be shown the names of the individuals but I’ve sat with the most senior people at the Inland Revenue, the people who run some of the high net worth units there. They have given me examples, anonymised examples, and so we are taking action.”

The confidential study by HMRC found the top earners are using ‘aggressive’ avoidance schemes to reduce their income tax rate to an average of 10%.

According to The Telegraph it found that the country’s 20 biggest tax avoiders used the following three main 'loopholes' to legally reduce their income tax bills by £145m between them:

  • Writing off business losses in one of their companies against their income tax bill
  • Offsetting the cost of business mortgages or borrowing on buy-to-let properties against their income tax bill
  • Taking advantage of relief on donations to charity

Richard Murphy, who warned in 2008 that the scale of tax avoidance was far higher than HMRC calculated, came up with a three-point plan for Osborne.

He said: “The first is re-estimate the issue. I’d suggest that involves talking to the very few people who have been right about it to date, including me. Second, definitions of abuse have to very clearly be redefined. The mantra, too readily accepted by HMRC ‘that it’s legal so it’s acceptable’ has to be confined to the bin. Third, we have to have comprehensive action to tackle this abuse. Now. Nothing less will do.”

From next year, the total amount of tax relief that any individual can claim will be limited to 25% of their income or £50,000, whichever is greater.

The proposal could lead to restrictions on philanthropic giving, however Osborne pledged to protect and encourage philanthropy.

He said: “I was very clear in the Budget that we are specifically looking at making sure we are still encouraging philanthropy and charitable giving. But that is a specific issue we can deal with.”

Replies (138)

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By johnjenkins
16th Apr 2012 09:35

Another reason

why Euroland should be re-organised. We have to get rid of EU courts and EU human rights. This bit piece, becoming Europeans can't work unless you "go for it" in one hit and Euroland controls everything and everybody becomes Europeans.

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By androo235
16th Apr 2012 12:36

oh oh oh what a lovely system......

 

The following is taken from the end of an article on this website a few days after this one, from here, https://www.accountingweb.co.uk/article/charity-tax-relief-cap-wreaks-havoc/526370 . The few lines point to the arcane complexity of just this corner of the system. What a lovely earner "modern" tax systems are for accountants and lawyers. And, of course, the complexity suits those able to purchase our "skills".

"The ICAEW Tax Faculty said the principal reliefs affected are loss reliefs that can be claimed against total income, qualifying loan interest relief and reliefs for charitable giving.

A number of smaller reliefs which are currently uncapped will also be affected.

The following will not be affected:

Reliefs for double taxation such as foreign and dividend tax credits and notional tax on life insurance gainsReliefs that are already capped such as pension tax relief, front-end Enterprise and Seed Enterprise Investment Scheme income tax relief, Venture Capital Trusts and the Cultural Gift SchemeComputational reliefs which determine only how income from a particular source is calculatedThe new business investment incentive for resident non-domiciled individuals (as this does not apply as a relief against total income but relieves income that would not otherwise be brought to the UK and so would not be taxable here anyway)The tax reclaimed by charities under the Gift Aid scheme"

landvaluetax.org.uk (Henry George - Progress and Poverty) and for the banks and bankers - positivemoney.org.uk (Steve Keen - Debunking Economics)

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By johnjenkins
16th Apr 2012 21:28

I too voted

for a "common market" not to become a European being governed by unelected whatnots.

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By dstickl
17th Apr 2012 07:31

@johnjenkins: Time now for UKIP, to regularise charity tax, etc?

On 16 Apr'12, Mr Alexander (chief secretary to the Treasury) told the Commons that the government would consult with philanthropists and charities about how the new charity measures would work. [These measures are not included in this year's legislation, and are due to come into force in April 2013, when a cap will be set at £50,000 in any one year, or at 25% of an individual's income - whichever is greater.] 

Mr Alexander was apparently silent - in response to a Tory intervention - on the possibility of introducing UK/rest of EU discrimination on tax treatment of charities, in order to avoid charities in the rest of EU benefiting from UK tax breaks!

In the USA, there is a cap of 50% of annual income for some causes and 30% for others.

The chief secretary to the Treasury said: "There may be attractions to some of the features, for example, of the American system in this area which we will certainly examine and consider in the process of that."   Mr Alexander added: "But I think the basic principle, that the wealthiest in the land should pay a fair proportion of their income in income tax, must be absolutely right."

CONCLUSIONS: (1) Given that the USA (like UK could if independent of EU) benefits from EU trade due to WTO rules, it seems that - from a charities tax rules perspective at least - UKIP is correct to seek taxation independence from rest of EU!

(2) If we wish to return to the "common market" concept - that in my memory most people voted for way back in the 1970's - then the WTO (World Trade Organisation) rules would now substantially achieve that! And

(3) Other apparent gross abuses - and their concomitant tax burdens on UK tax payers - in the rest of EU would be avoided, if a UKIP independence policy won!

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By Tom 7000
17th Apr 2012 13:21

Spending

I just think you shouldnt spend more money than what you earn and that includes governments.

As for charity payments...couldnt taxation be put in the same bracket...you give something away for the greater good...its just the ''government'' decide how to spend it ie soldiers nurses etc as opposed to  the ''trustees'' of say the world wildlife fund  which spends it on pandas and jaguars...

I think I am getting philosphical now...cant be good

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Replying to DJKL:
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By The Black Knight
17th Apr 2012 13:31

Hemlock

Tom 7000 wrote:

I think I am getting philosphical now...cant be good

No ! Just look what happened to poor old Socrates.

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By mikewhit
17th Apr 2012 16:24

So all that means

is that the legislation has to allow the taxpayer to prove that the non-UK charity satisfies the appropriate UK charity commission criteria - which no doubt would mean more tax commissioners hearings ?

Importantly, it does not say that they have to use the non-UK country's own charity definitions.

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By pauljohnston
18th Apr 2012 11:53

Sorry but I have just had a thought

George Osbourne found many millionaires paying low rates of tax but he did not say which years.  If the figures referred to the dates before his first budget the max rate of CGT was 18%.  Thus large Captail Gains would have reduced the overall tax take and if I had a very high income and I could live on capital gains tax at 18% (now 28%) I would be very tempted.

Having read various articles in Economist and FT I do wonder if the UK is in a worse financial position that we have been lead to believe.  I have no idea how much tax is refunded to Charities but effectively it is a tax on the remainder of tax payers, ignoring any other issues but the financial angle.  Can we as a country afford this?

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By Wiganer Elaine
18th Apr 2012 12:22

Another thought

Can someone explain exactly how charities reclaim their basic rate tax? Is it a return of all donations received which are then grossed up by 20% and the government repays the difference to the charity?

If so (and I have never dealt with a charity so I really don't know) how does the charity differentiate between the monies donated by higher rate/basic rate and non-tax paying people?

There are very many people who will donate say £2 -£3 to various street collectors or pick up the phone and donate to the numerous televised appeals. Not everyone who donates to charity will necessarily be someone who actually pays tax and if their income is too low to pay tax then realistically they will not complete a tax return and so will not actually pay the tax that the charity will possibly reclaim. 

I find generally that a lot of generous people (in the true sense of the meaning) are those who actually have very little in terms of material wealth/possessions - they try to do their bit because they care not because they will be able to use a donation as a tax relief!

How is this taken into account when the charity makes its claim from the government?

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Replying to JustinMillican:
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By Paula Sparrow
18th Apr 2012 17:27

Charity tax reclaims

Wiganer Elaine wrote:

Can someone explain exactly how charities reclaim their basic rate tax? Is it a return of all donations received which are then grossed up by 20% and the government repays the difference to the charity?

If so (and I have never dealt with a charity so I really don't know) how does the charity differentiate between the monies donated by higher rate/basic rate and non-tax paying people?

If you make a payment to a charity you are likely to be asked somewhere if you would like to make the payment under the gift aid scheme.  All you need to state is that you are a UK taxpayer.  These donations are totalled and that forms the basis for the repayment claim for the charity.  It is irrelevant to the charity whether the payer is a basic rate taxpayer or higher rate taxpayer, or indeed pays any tax at all.  They can only recover the basic rate equivalent of the net donation.

The taxpayer is the one responsible for ensuring that they pay enough tax to cover the amount which will be refunded to the charity.  They are also currently entitled to claim higher rate tax relief through their PAYE code or self assessment if they pay tax at higher rates.

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By mikewhit
18th Apr 2012 13:49

Biggest "avoiders"

Wonder why the media pack has not yet come back to Tony Blair on this ?

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By Wiganer Elaine
19th Apr 2012 11:40

Charity tax reclaims

Thanks Paula,

So, in the real world, many non-taxpayers will make a small donation of say £2 - £10 to their favourite charities or appeals. They will not be required to complete tax returns to ensure that they have actually paid the tax the charity will reclaim yet the charity will still reclaim a tax credit.

Just how much does this cost the country?

I think the angle that the idiots in government took over this issue (ie it's a loophole used by the very wealthy) has completely blown up in their faces and caused the general public and the press to ignore what is actually a valid issue and should be discussed given the state of the country's finances.

We already officially pay huge sums to an overseas aid programme (which I think should be stopped immediately) and now it appears we are also inadvertently paying charitable contributions! We should at least know how much this is costing the country and then decide if it should be continued in this way.

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Replying to DJKL:
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By Ken of Chester le Street
19th Apr 2012 13:24

Tax avoidance

Wiganer Elaine wrote:

Thanks Paula,

So, in the real world, many non-taxpayers will make a small donation of say £2 - £10 to their favourite charities or appeals. They will not be required to complete tax returns to ensure that they have actually paid the tax the charity will reclaim yet the charity will still reclaim a tax credit.

Just how much does this cost the country?

I think the angle that the idiots in government took over this issue (ie it's a loophole used by the very wealthy) has completely blown up in their faces and caused the general public and the press to ignore what is actually a valid issue and should be discussed given the state of the country's finances.

We already officially pay huge sums to an overseas aid programme (which I think should be stopped immediately) and now it appears we are also inadvertently paying charitable contributions! We should at least know how much this is costing the country and then decide if it should be continued in this way.

Not quite so. Elaine!

HMRC have an audit team that operate on a "repay now, check later", basis. The charity has to retain some evidence of payment, usually an envelope in the case of cash, that enables HMRC to link the donors to their tax return, or an entry in the bank statement of the charity for a standing order,  or a pay-in book entry for a cheque payment . The HMRC auditor  verifies from this that the  donation has actually been recieved. The donor  has to have made a declaration that his donation is made under gift aid, and it's from these declarations that HMRC can link the payment to the donor. At the beginning, the donor had to state his NINO, but this is no longer a requirement. I think they rely on postcodes now.  The Gift Aid declaration  is printed on the envelope in the case of public collections, or at least it should be.

I suspect that HMRC operate on a de minimis principle, ie whether the tax which may be lost is less than the cost of recovering it. But, with respect, gift aid isn't a scheme drawn up by a profligate former government in order make her give to charities she doesn't approve of.  It is a simplified version of the old Deed of Covenant schemes, which relied on an aspect of law which was actually quite ancient.  An  annuitant  was taxable on his annuity, because it was his income and not the income of the donor. The then Inland Revenue made sure they got their tax by requiring the  payer to  deduct it from the annuity. But either charity trustees were in breach of trust if they paid tax to Inland Revenue, or the Crown was legally robbing the Charity, so tax law required the Revenue to pay back to the charity all the tax it had deducted. . For this to be effective the annuity had to have been created by a document under seal, a "deed of covenant" all properly witnessed, and it had to be capable of exceeding 6, later 3, years. The covenants had to be enforceable( and they were, as apparently a lot of people discovered when a  certain government nationionalised the hospitals and took the covenantors to court to enforce them!).  The trouble was, many charities didn't understand the scheme, Covenants weren't properly executed, or donors had stopped paying tax by year 5, and HMRC had to recover it from them on the grounds that they weren't going to pay tax they hadn't collected.. This of course is still the case. So the Inland Revenue decided that where a payment exceeded £600 it could be treated as a single payment annuity, without the need for a deed of covenant under seal. This minimum was gradually reduced, and eventually it was abolished.   We now have a situation where even the smallest of payments is  in effect a single payment annuiy. And as an annuity is the income of the annuitant and not the payer, the payer must be allowed to deduct it from his taxable income, even at higher rate.  This is the "loophole" the Chancellor is unhappy about.  Provided the charity is genuinely charitable, which is in the remit of the Charity Commission to decide, it is no loophole, but  venerable law. 

Many people find this difficult to understand. I personally find even this easier to understand than what is the relevance of overseas aid to  all this.  A great many charities meet needs which are overseas,  famine, disease and things like that. But this isn't germane to the argument!  

 

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Replying to DJKL:
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By Ken of Chester le Street
28th Apr 2012 13:26

tax avoidance and gift aid

  Hallo Elaine

 

Since I last replied I have had time to read HMRC's conultation document on GASDS. From 06 04 2013 a charity  with a gift aid scheme and an impeccable record can claim a repayment on  cash donations under £20 up to the lower of £5000 or its annual gift aid claim.  So a tin-rattling charity with a properly run Gift aid scheme can reclaim 25% of its first £5000.

As the treasurer of a small charity I am of course delighted! 

 

But it does negate the last semblance of rationality to a system that, (vide my last repy to you,) goes back to Henry VIII!

 

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Teignmouth
By Paul Scholes
19th Apr 2012 14:02

How much?

Elaine - just to put things into perspective, per the CIOT the government pays out about £1B a year in gift aid to charities and other gift aided organisations, ie under 0.2% of it's tax take.

Although not split by UK or overseas, The Institute of Funraisers say that we donate £11B pa and half of this comes from just 7% of the donors.

Bringing this down to street level, ie for people like me, Virginmoneygiving have recently announced that in the 2 & a half years since it was launced it has processed over 2.7M donations totalling over £100M to 5,000 charities, over 85% of which were gift aided.

The charitable/voluntary sector in this country is huge and without it a huge burden would fall back on local and national government with almost certainly a far greater cost to us all.

With regard to overseas charitable work, the issues of our responsibility towards it and not to discriminate against it, have already been well made.  From a personal point of view it makes no difference to me whether a human or group of humans have, by accident, been born in or suffer in places 100 or 10,000 miles away.  This is the beauty and democracy of personal donations, we are not relying on the government of the day to decide where our tax aid is to be directed we all have a say.

We may be in the top 10 of wealthiest nations of the world but give it 50 to 100 years and we may well be at the other end.

 

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By johnjenkins
19th Apr 2012 14:22

Change that to

5 to 10 years Paul.

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Replying to Mr_awol:
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By The Black Knight
19th Apr 2012 14:35

Faster

johnjenkins wrote:

5 to 10 years Paul.

Faster If GO has anything to do with it !

Might even be there already and just waiting for the accountancy to catch up.

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By Paul Scholes
19th Apr 2012 18:27

My first bit of client advice on charity donations

Have been reminding clients to make sure they put every penny down of gift aid donations made in the year.

One of them did a "third of the Tour de France" cycle ride last year raising thousands for charity and making his own donations.  He's actually involved in politics (so starboard I'm surprised he stays in the saddle) so couldn't resist pointing out that he should put his claim in soon as GO was going to limit future claims to 50 kms and that if he cycled outside Europe he'd get nothing.

I await the reply or letter from another firm.

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By androo235
23rd Apr 2012 14:04

I wonder if I'll get the last word.

Well not really as I'm quoting another. This appeared on the LVT campaign website Sunday 22nd April. Link is below.

"I for one am sick of complaints about tax avoidance. It is legal and it arises because of the incompetence of legislators. The papers this weekend are full of ill-thought-out comment on the subject. Those who write this stuff, and most politicians, appear unable to grasp the most obvious fact: taxes on people's earnings and companies' profits are bound to be avoided and evaded. It cannot be otherwise. 

In the first place there are problems of definition, which keep an army of lawyers in business. In the second, companies are abstract concepts. If a company has a multinational personality it can make its profits pop up in the most advantageous (to it) location. People can just move. Or work any residence rules to their advantage.  Sales taxes are just avoided through cash-in-hand trading and claiming the cost of the purchases as business expenses.   A further problem with these taxes arises because they have a deadweight cost. If a government wants to discourage a certain type of behaviour, it will put a tax on it. Taxes on alcohol lead to less boozing. But most taxes are on economic activity and have a deadweight cost: they discourage economic activity. It then becomes necessary to mitigate their effects with exemptions and concessions, thereby creating loopholes.  A tax on the rental value of land has none of these effects. Much corporate profit consists of land rental value and could be picked up through LVT before the accountants have had the chance to work their magic spells on it. Much of the rest should not be taxed anyway.  Those who are not prepared to speak out loud and clear for LVT, should stop complaining about tax avoidance. It shows either a fundamental lack of understanding or is pious hypocrisy."  From http://www.landvaluetax.org/the-lvtc-blog-by-henry-law/pious-hypocrisy-about-tax-avoidance.html Mr Law is, I think, a full on Georgist single taxer (though I detect he may be sympathetic to sin taxes). Not sure If I'm completely with him but I certainly mostly am.

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By The Black Knight
23rd Apr 2012 14:22

LVT

Would this not be extremely unfair ? What if you got taxed on a value that you did not want to use or only received a Peppercorn rent from.

Would this not direct behaviour to the most cost efficient use---- palm oil this week ? instead of woodland ?

Why should only capital owners pay tax perhaps they are the only ones that should receive the benefit of those taxes.

The reason we have a complex tax system is so it is fair to everyone.

You cannot do this with a simplified system.

There will always be avoidance and Evasion, just like there will always be burglary and free loaders. What we really need is more enforcement in the area of tax evasion which is currently a free for all and better drafted legislation to clamp down on artificial avoidance.

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By androo235
25th May 2012 21:20

landvaluetax.org - Henry George's - Progress and Poverty

Blacknights last post demanded a lengthy response from me. Even so, I've cut it short as I do (I know it seems hard to believe) have a life or at least my wife says I ought to. 

A general response to "LVT would be unfair" is here (scroll down) http://www.landvaluetax.org/what-is-lvt/ . I'm not sure what you mean by "What if you got taxed on a value that you did not want to use". If you mean that there should be no cost to the landowner for not using land and so denying the community access to it while the landowner watches it's value rise. This is more or less the situation now and is the problem of brownfield land. It's too cheap for landowners to do nothing exept continue to own while they watch land values rise due to a scarcity their inaction exacerbates, encouraged, of course, by the current tax system. 

"or received only a peppercorn rent". I assume this means charging a rent to the tenant below the LANDS rental market value (that is the amount of tax that would be levied under LVT). In this case the landowner is already choosing to forgo some income from the asset and so presumably has other sources of income. So, remembering that, under LVT income and more or less all other taxes would be gone, the landowners net income from other sources will rise but he/she will now take a cash loss on the rented property. Overall then they could probably continue as before with some minor adjustments. There are other possibilities here but it really would depend on the exact scenario. 

"Would this not direct behaviour to the most cost efficient use---- palm oil this week ? instead of woodland ?" I think you're confusing LVT with the planning regime which would remain (in whatever form, the until recently complex and long one or the new short one or as amended). Other than that what problem do you have with directing [economic] behavior towards its most efficient frontier.

I continue in the next post (for formatting reasons).

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By androo235
23rd Apr 2012 21:40

landvaluetax.org - Henry George's - Progress and Poverty - 2

It beggars belief that you think the current system is actually fair (nor is it efficent or effective). It is simply the product of historical expedience. LVT was very nearly introduced in the UK by Lloyd George's Liberal Government of 100 years ago (Churchill supported LVT among others, Einstein springs to mind). It was defeated by the Lords, at that time still under the complete control of the landowner class, and circumstance. Indeed you might argue that that circumstance was a quarrel among landowners that co-opted us all.

"As John Beckett and Michael Turner show, on the eve of the First World War, David Lloyd George was poised for political triumph with his ‘Land Campaign,’ which proposed a Ministry of Land and intensive rural development. But the war was a complete disruption, and in the four years after it ended, the market did what Lloyd George had not been able to do. With wartime price constraints gone, much land changed hands, flowing from old aristocratic families whose sons had died in the war, to the families of tenant farmers. While Beckett and Turner argue that the importance of this turnover has been exaggerated, to people at the time [and since it seems] it appeared to mark the end of the long aristocratic and gentry dominance in society and politics." Is a quote from http://www.history.ac.uk/reviews/review/946 there's more there of course.

"Why should only capital owners pay tax perhaps they are the only ones that should receive the benefit of those taxes." 

Capital owners would not pay tax at all (at least not in that capacity in a pure single-tax implementation), landowners would though.

"You cannot do this with a simplified system."

LVT would be a simpler system compared to the current system, however it would not lack sophistication and indeed would respond dynamically to changes in the economic market place. The current system does not other than through the lobbying system of exemptions and loophole creation.

 

I agree there will always be human nature and so among some, probably all of us, the desire to avoid or minimise responsibilities. This is why it is essential that we have an efficient and effective tax system (the third E as we all know is Economic).

More enforcement of the current rules? Make more rules to capture all possible scenarios? We've been going down this road for some time now. I don't think it's working and in an increasingly globalised economy it will get ever harder to make it work while the unit ot taxation remains the mobile individual and the ephemeral corporation.

There is lots more on the landvaluetax.org website including responses to many objections that have been raised against LVT (the classic one being the asset rich income poor pensioner). Finally I urge you to read Henry George's - Poverty and Progress (available for the Kindle about £3.50) or there's a modernised and abridged version, free, here, http://www.henrygeorge.org/pcontents.htm . The original was written about 140 years ago in California. It is totally relevent today. 

I'm also a fan of Steve Keen (Debunking Economics) and the positivemoney.org agenda. This is not quite the same subject but certainly related.

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By androo235
23rd Apr 2012 22:59

Why is LVT relevant to this charity and tax relief debate?
Because under LVT it would become a complete non-issue.

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By The Black Knight
25th Apr 2012 12:50

Sounds unfair to me

So if I own a house and can't achieve a market rent or let my granny live there or the tenant does not pay his rent.

I should pay tax on what some politico thinks I should have earned anyway ?

All the LVT seems to be is a recipe for the rape of the planet....Times have changed since Lloyd George and Einstein.

Tax also influences behaviour, e.g. charitable giving, carbon emissions, getting up and going to work, preserving woodlands, baby production, etc etc.

You can also direct help to those that need it, Pensioners do not pay NIC for example ! no vat on children's clothing and food etc.

I can see bits of the tax system that could work better (e.g. bring back indexation) that might be considered unfair, but cannot see that the current system is unfair at all.

I can see the issue with limiting the amount of charitable giving if the government cannot match the wealthy donors payments or if this is going abroad to an unintended source, but it will influence some donors behaviour and their behaviour at the moment should not be described as illegal or immoral in any way, after all they did not make the rules, only played by them.

 

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By androo235
25th Apr 2012 15:38

google landvalue.org, read Poverty and Progress

First "can't achieve the market rate" - is a nonsensical comment. By definition you will achieve the market rate. If a tenant doesn't pay that is a problem under any system and there are remedies are there not. If you choose to let your gran live in a property you own at an opportunity loss to yourself, that's your choice (and is now).

"I should pay tax on what some politico thinks I should have earned anyway ?" I don't understand this? What do you mean?

Why do you think LVT would be a recipe for the rape of the planet?

LVT is not a "small state" libertarian project. It can be, but it can also be a big state communitarian one. The point is that that the communitarian / libertarian (socialist / market liberal) continuum of opinion will continue under LVT, Governments will still have choices about how to spend public revenue as they do now. They can have a large public sector spending all public revenue themselves or they can give much of it straight back to the population using whatever scheme, fair [per capita] or not [to the payers], they manage to get an electoral mandate for implementing.

The landvaluetax.org website has, among other things, an faq responding to many objections that have been raised against LVT (the classic one being the asset rich income poor pensioner). Finally I urge you to read Henry George's - Poverty and Progress (available for the Kindle about £3.50) or there's a modernised and abridged version, free, here, http://www.henrygeorge.org/pcontents.htm . The original was written about 140 years ago in California. It is totally relevant today. 

 

I'm also a fan of Steve Keen (Debunking Economics) and the positivemoney.org agenda. This is not quite the same subject but certainly related.

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Replying to Jack Spratt:
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By The Black Knight
25th Apr 2012 16:28

Because

androo235 wrote:

First "can't achieve the market rate" - is a nonsensical comment. By definition you will achieve the market rate. If a tenant doesn't pay that is a problem under any system and there are remedies are there not. If you choose to let your gran live in a property you own at an opportunity loss to yourself, that's your choice (and is now).

"I should pay tax on what some politico thinks I should have earned anyway ?" I don't understand this? What do you mean?

Why do you think LVT would be a recipe for the rape of the planet?

Who is going to asses[***] the market rent ? If I rent to gran at £1 or my friend at £500 or could I have let to Tesco at £1000.

Tenants frequently don't pay the remedies available according to the law are not available to small entity as the legal fees outweigh the advantages and then often there is nothing to collect anyway ! So you are left with a position where you have no money to pay the tax and have to sell your land to a large entity that can soak up any losses with profits from across it's portfolio thus becoming a monopoly and increasing rents to maximize income !

The profit element will dictate that all land be used for its market value Palm oil for dirty diesel engines ?....an environmental disaster as the poor old Orangutang will tell you ! CO's ?? planets lungs gone ??

At a domestic level property's will not be repaired until they are falling down, no improvement work will be carried out. e.g. I could have had air conditioning in my office for a reasonable fee but the fact that my business rates bill would have increased made me decide NO.

Politicos : We see time and again they live in a different world, they already think that all business owners earn more than they do and are somehow the root of all evil : imagine this with Landowners !

Who are the main landowners , Church of England ? Mormons , Tesco's, Duchy of Cornwall etc

If you want to hand power back to these huge enterprises then this seems the way to do it. Poverty for all ?

No doubt a savy landowner would find a way of taxing the profits of small business (and reducing the market value of rents) anyway so perhaps you will end up where you started anyway ?

 

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Replying to Jack Spratt:
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By The Black Knight
25th Apr 2012 16:30

Because

androo235 wrote:

First "can't achieve the market rate" - is a nonsensical comment. By definition you will achieve the market rate. If a tenant doesn't pay that is a problem under any system and there are remedies are there not. If you choose to let your gran live in a property you own at an opportunity loss to yourself, that's your choice (and is now).

"I should pay tax on what some politico thinks I should have earned anyway ?" I don't understand this? What do you mean?

Why do you think LVT would be a recipe for the rape of the planet?

Who is going to asses[***] the market rent ? If I rent to gran at £1 or my friend at £500 or could I have let to Tesco at £1000.

Tenants frequently don't pay and the remedies available according to the law are not available to a small entity as the legal fees outweigh the advantages and then often there is nothing to collect anyway ! So you are left with a position where you have no money to pay the tax and have to sell your land to a large entity that can soak up any losses with profits from across it's portfolio thus becoming a monopoly and increasing rents to maximize income !

The profit element will dictate that all land be used for its market value Palm oil for dirty diesel engines ?....an environmental disaster as the poor old Orangutang will tell you ! CO's ?? planets lungs gone ??

At a domestic level property's will not be repaired until they are falling down, no improvement work will be carried out. e.g. I could have had air conditioning in my office for a reasonable fee but the fact that my business rates bill would have increased made me decide NO.

Politicos : We see time and again they live in a different world, they already think that all business owners earn more than they do and are somehow the root of all evil : imagine this with Landowners !

Who are the main landowners , Church of England ? Mormons , Tesco's, Duchy of Cornwall etc

If you want to hand power back to these huge enterprises then this seems the way to do it. Poverty for all ?

No doubt a savy landowner would find a way of taxing the profits of small business (and reducing the market value of rents) anyway so perhaps you will end up where you started anyway ?

 

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By androo235
26th Apr 2012 15:51

The market assesses the market rent. Isn't that obvious.

 

Nevertheless assessing the annual rental value of land is an issue that LVT has to confront. The landvaluetax.org site has faq's and other resources dealing with and discussing that issue at some length. Basically the issue is separating the land rent component from the rent commanded by whatever has been built on it. That said it is a little more complex and subtle than that, albeit not an insurmountable problem.

I would suggest that the overwhelming majority of tenants  do pay, although to the extent that they don't it is not a problem specific to a world which operates with LVT.

Environmental, health and safety, planning/zoning law etc will not change because of LVT as such so I just don't understand why you think this? They are separate issues governed by separate legislation and government departments. If environomental and sustainability issues are important to you you will find pieces on the landvaluetax.org site arguing that LVT will advance those causes. Also take a look on positivemoney.org.uk I liked this piece particularly, http://www.positivemoney.org.uk/2011/10/rethinking-economic-growth/ (you may need to create an account to read it). There are lots of other articles on the positivemoney (PM) site, I have read a few. The theme there is monetary rather than tax reform though I think - as do many others, that the issues are related. 

"At a domestic level property's will not be repaired until they are falling down, no improvement work will be carried out. e.g. I could have had air conditioning in my office for a reasonable fee but the fact that my business rates bill would have increased made me decide NO."   

You really need to go to the LVT site and understand how it will work as it will have the opposite effect to that you suggest. The tax (charge) is on the rental value of the land, not on whatever is built on it. Therefore it is in the interest of the landowner to maximise the return from the land by using it to its best advantage (within the limits set by environmental/planning law etc - which restrictions, as they do now, will strongly influence the value of the land). Under LVT the landlord will gain no advantage, as they do now, by simply sitting on derelect sites (or by leaving flats above shops or other rentable property empty for example).

"Politicos : We see time and again they live in a different world, they already think that all business owners earn more than they do and are somehow the root of all evil : imagine this with Landowners !" What does this mean?

LVT will have wide ranging effects, some of them obvious, many of them subtle, all of them powerful. I believe the effect will be overwhelmingly positive. It is acknowledged there likely will be friction in the transition, however for the most part the rubbing will be hottest against those most able to endure and recover from it. If you think LVT will hand more power to landowners (as if they needed it) then you have misunderstood it completely. Please go the the landvaluetax.org site and read something about it (I would have everyone read Progress and Poverty if I could.... ) before posting again.

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By The Black Knight
26th Apr 2012 16:02

market value does not work like that

For business rates or tax ?

Tenants often do not pay especially with residential properties and who pays the tax when a company goes into liquidation do we then play dominoes faster.The Child tax credit generation believe they do not have to pay for anything and the law supports them.

Simplification might sound good but you are only going to need a list of other rules, Planning etc to replace the role of tax legislation and planning and behaviour inspectors instead of tax inspectors.

Tax is not just about a tax calculation !

Does no one have a pension it's only the tax relief that makes this attractive  ? no none contribute to charity ? If no records need to be kept are computers just for visiting facebook and shopping ?

And as we don't make anything in the UK anymore won't all these services disappear abroad where the rents are cheaper, or at least reduce the square footprint, to a registered office ? rent tending to Zero..... ..Tax tending to zero.

Can't see it happening really.

 

 

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By androo235
26th Apr 2012 17:01

as I said go and read the LVT site

You (black knight) throw out five or six knee-jerk objections to each reply I post and my life really is too short to keep responding. My replies for the most part have been asking you to go and read the sites I have indicated. I will be able to tell when you have, not necessarily because you will be a convert, I hope you will, but because your objections should be more informed, specific, reasoned and relevant.

landvaluetax.org - Henry George - Progress and Poverty.

I also like positivemoney.org and Steve Keen (Debunking Economics).

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By pauljohnston
27th Apr 2012 09:33

@androo235

Your ideas look good on paper but fall apart because you want to tax just one portion of the population.  Can I suggest that you look at a flat rate of tax say 15% on all income, sales, capital gains etc.  No allowances whatsoever or maybe just a personal allowance against income.

Any taxation system that tries to be fair becomes more and more complicated.  Ours in the UK is the second most complex in the work with over 100,000 pages of written law and court judgements.

Real estate is an easy target one cant move a house but taxation can cause as many problems as it solves.

The biggest single problem is that politicans are spending someone elses money and therfore dont have the sets of balance that a person could have ie £1000 income, spend £1000, overspending and overpromising are just part of it. 

Have look at Adam Smiths tennets

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By johnjenkins
27th Apr 2012 10:39

Have a look at

a film called "Thrive" on utube. It will either answer all your questions or create many more.

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By androo235
27th Apr 2012 15:33

Do you know anybody that doesn't use land?

"Your ideas look good on paper" - these are not my ideas they are those of Henry George who wrote Progress and Poverty 140 years ago. I am guilty too of only discovering these ideas in the last year. I suppose I have the zeal of a convert.

We all use land one way or another and that use and the excess value it gives rise to, via the community, is captured in land rents. The question is who gets the rent? No-one ever made any land (well OK the Dutch, Hong Kong airport but these are very much at the margin and are details that can be accommodated - in fact they are accommodated by the fact that investments on that scale are generally public investments) so why should anyone get any rent for land. Land rent belongs to the community.

Henry George was aware of and had read Adam Smith and refers to him often among others (Mill, Ricardo some French Economists whose names escape me - Bastiat?). The one big writer that he does not refer to  is Marx, at least not by name or directly. George's work touches, of course, on the same areas as Marx's did. Marx was working around the same time but was not as yet available in English. George's work and conclusions (he refers to it as "the remedy") had impact at the time - after all we nearly got LVT in the UK early last century. Marx talked of revolution and had a seemingly authoritative German gravitas (though I've read Francis Wheen's biography so I'm not so sure) - as opposed to George's flaky San Francisco backdrop and almost folksy, though erudite, Klondike town hall style. Moreover Marx made a clear call to class consciousness and so captured the political arena. Hence George has been sidelined for a century.

"Real estate is an easy target one cant move a house but taxation can cause as many problems as it solves." Why? Remember this has to cause 100,000 pages, and counting, of problems. Also the tax/charge is not on houses, factories or buildings and improvements of any kind but on lands rental value.

Taxing income, even at a flat rate, still falls foul of being a tax on the income of mobile individuals and ephemeral companies - it invites avoidance and evasion (see my first post on this thread). I believe the current system has created the offshore/tax haven industry that exists today - see Shaxson's Treasure Islands - he thinks that too. With LVT that industry would contract and eventually collapse as LVT spreads as it would be pointless, but I digress.

I am aware of the flat tax argument and personally could see it having a supporting role to LVT by taxing very high income individuals (perhaps some tax havens will hang on then....). Still, many Georgists are single taxers and would reject even that. And, maybe they are right. If LVT can raise sufficient revenue to run public services (and have all sorts of positive micro-economic effects which will help to shrink the public sector while maintaining employment and prosperity) why have another tax if one isn't needed?

landvaluetax.org - Henry George - Progress and Poverty.

positivemoney.org.uk -  Steve Keen - Debunking Economics

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By androo235
27th Apr 2012 16:36

Thrive - over 2 hours.

Haven't watched it yet but will give it a go - though I'm suspicious of it....

Here's some shorter videos which are I think, a little more grounded than Thrive looks like it might be.

http://www.youtube.com/watch?v=6ZkfmY1PMng - 7 mins 40 secs.

http://www.youtube.com/watch?v=rC720Cl3N-0 about 10 mins (it starts very slowly from a black screen - I thought it wasn't working but it is.. so really about 9 mins).

There are long videos on these subjects too of course, Money as Debt is a series - I also liked Bill Still's Money Masters. Fred Harrison has made many videos where LVT is, if not the subject then the subtext, all those I've come across  are short - 20 mins or so max. There isn't much else on youtube about LVT as it's an even less sexy subject (we are talking about tax here) than monetary reform. Apart from which the public generally seems to regard both (current monetary and tax systems) as set in stone and parts of nature - it doesn't occur to them that both could be different.

Oh, not to forget, "Inside Job"  it won Oscar Best documentary last year or the year before. It doesn't promote a reform agenda as such but certainly exposes the current (money) system - 2 hours or so and excellent.

So, for LVT, read Progress and Poverty, in the original, 570 pages of 6pt type written in 19th century prose. I did and quite enjoyed it. There's a modernised and abridged version about a third the length, free, see one of my previous posts for the link to it or google it.

landvaluetax.org

positivemoney.org.uk

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By androo235
28th Apr 2012 01:03

For the Black Knight

http://www.dissentprojectsltd.com/killingfields.html Pro LVT activist environmentalists.

 

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By pauljohnston
29th Apr 2012 10:08

@androo235

Please can you advise us which other country/nation bases its taxation on real estate value?  This thread is about George Osbourne's shock at finding that some millionaires pay tax at less than 25%.

We should now return to this thread or if you wish to continue a new thread needs to be created.  Those who may wish to add to the original thread are being crowded out.

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By androo235
29th Apr 2012 16:35

LVT examples.... and Thrive

LVT is operated at a local or regional level in various places around the world. No nation state operates it although I think Hong Kong has something close to it. As I've said we, the UK, were nearly the first about 100 years ago to implement nationwide. Here's an overview and discussion of some of the implementations that have been tried - http://www.henrygeorge.org/rem4.htm .

Sorry, Paul, if you feel I had hi-jacked this thread, I was aware of this and had tried to draw a line under my contributions with my  post headed "as I said go and read the LVT site", but then felt compelled to respond to you and John Jenkins.

With regards to John's post I have just finished watching Thrive. It starts very slowly and I had to force myself to keep watching for the first half-hour or so - but it gets better. I'm not sure that I buy the whole thing, though I'm open to it (I did watch it all...). I certainly felt at home with the thrust of the monetary reform stuff and the hinted at LVT agenda towards the end too. Hinted at, if it is and that's not just my wishful thinking, because even in the context of this film I suspect the makers know that LVT is controversial and a hard sell and so preferred to go straight for a no taxes at all utopian vision instead. Who could object to that as a vision!

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By johnjenkins
29th Apr 2012 17:21

Not just a vision.

The only thing that stands in its way is greed.

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