4 hours ago
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It’s been tiresome to see the glee with which Angela Rayner’s been accused of hypocrisy this week, but then anyone who sticks their neck out to call for an end to this engine of wealth inequality gets the same battering. Millionaires who’ve seen first-hand just how completely the system is rigged in their favour, who know how wrong it is and want to change it, get a similar verbal beating on social media and in certain sections of the press. It’s almost as if they protest too much?
Take this week’s political tax stories, one big and one largely ignored. Rayner’s tax behaviour, through lack of proper advice and planning, has created a political nightmare for the government. How could someone on the frontbench of the Labour government have to resign because they didn’t pay enough tax? Also scrutinised, if far less widely reported, have been the tax practices of the leader of Reform UK, who is reported to have channelled some of his earnings into a company to reduce the tax he has to pay on them, having previously criticised people who try to avoid tax as the “common enemy”.
Both politicians have used or tried to use the tools available to those who are relatively wealthy. But there is an even bigger problem. Once you get to be rich or super-rich, there are more and more channels by which advisers might try to shrink your tax bill.
Let’s face it, many of us can be tax hypocrites in one way or another. We all know stories of plumbers and mechanics paid cash, in full knowledge that their intention is to reduce their tax bill. Avoidance at that level is wrong, but a crucial difference is scale. What happens at street level is incomparable to the billions lost through the super-rich exploiting a system tilted in their favour.
We should be proud of the tax we pay because we know it is an investment in our country and our people. What better way to spend your money? The current problem with this argument is that Britain is pretty broken. That’s not because of the poorest people – whether it be those receiving benefits or desperate people coming here on small boats – it’s because successive governments have failed to invest in our country; they have lacked the character and the gumption to raise the revenue needed for that investment from the richest people; and they have not addressed the wealth inequality that’s a drain on any kind of growth.
A cash payment to a plumber is peanuts compared to the taxes we lose due to wealth management firms advising the super-rich on ways to minimise their contribution. Even Farage’s method for reducing the tax he pays is laughable compared to those with serious wealth. He will know this, given his recent paid appearance as a keynote speaker for wealth consultancy Nomad Capitalist, which specialises in providing “holistic, legal strategies that enable successful entrepreneurs and investors to reduce their tax bill”. From trusts to partnerships, private equity, lowering capital gains, offshoring wealth, a laughable lack of taxes on stocks of wealth – there is a never-ending list of ways the richest can reduce their tax bill, and a never-ending list of wealth management firms helping them to do it. The way Britain’s tax system works offers the sharpest tools to those with the most money, leaving everyone else with almost nothing. Their effective tax rate is so much lower. Even the best intentioned millionaire is likely to have been advised on how to reduce their contribution. The likes of Farage know this. And it’s surely here that the real hypocrisy lies.
Despite Rayner’s resignation, it is never going to be one action or one individual changing their behaviour that can address this. We need national action to rebalance the tax system or it will continue to get worse. Earlier this year the National Audit Office pointed out that the complexity of the richest people’s tax affairs increases the opportunity for their tax planning and avoidance; that wealthy taxpayers have faced fewer penalties in recent years, and criminal prosecutions of wealthy individuals have also declined.
We can’t keep turning a blind eye to this.
The government must crack down on tax dodging, especially by the super-rich, but it must go so much further than that if it wants to transform our country and have a fighting chance at the next election. It must raise taxes on the very richest. Equalizing the tax rate on all forms of income (such as capital gains) would help simplify our system and make tax avoidance measures harder to use. And a 2% tax on those with over £10m would be a fabulous way to redress the imbalance in how we tax wealth.
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The current focus on who pays what and how will focus on individuals, but it should also prompt the government to build a tax strategy that both addresses tax dodging by the very richest and steps into ambitious tax policy reform on extreme wealth.
The budget is just around the corner. There is an opportunity for this government to turn this political problem into something popular. That opportunity lies in taxing the super-rich.
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Rebecca Gowland is executive director of Patriotic Millionaires International
