Bill Carmichael: Best way to end Panama loopholes is to cut tax

I ALWAYS get distinctly nervous when politicians start talking about making people pay their 'fair share' of tax, '¨as has happened this week after allegations of widespread tax dodging were revealed in the leaked Panama Papers.
A low-tax economy would lessen the need for David Cameron's family to invest their money offshore.A low-tax economy would lessen the need for David Cameron's family to invest their money offshore.
A low-tax economy would lessen the need for David Cameron's family to invest their money offshore.

The trouble is who exactly decides what constitutes a “fair” level of taxation?

Most people, including left wing politicians and entertainers, always believe that their “fair” level of tax is a lot less than everyone else’s.

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And what John McDonnell or Diane Abbott thinks is your “fair” share may differ radically from your own estimation.

To get around this – and make tax a matter of objective fact rather than subjective caprice – we do one simple thing: we make the tax code part of our law.

MPs debate and vote on tax legislation and if it is passed it becomes part of the law of the land – simple.

This means we, and big companies and fabulously rich people, are obliged to pay all the tax that is required by law – and not a penny more.

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This enables firms and individuals to plan their financial affairs secure in the knowledge that the rules are not going to suddenly change on the whim of some populist chancer with a political axe to grind.

If you break the law – tax evasion rather than tax avoidance – then you should face the consequences.

But it also means that companies and individuals are perfectly entitled to take any action they see fit to minimise their tax bill – as long as they obey the law.

This could be something as simple as taking out an ISA savings account or gift-aiding a contribution to charity.

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Or it could involve the more complex schemes employed by the likes of Ken Livingstone, Jimmy Carr or David Cameron’s father to reduce their tax 
bills.

They are all types of tax avoidance that are perfectly legal – although admittedly the hypocrisy of left wing tax dodgers does leave a bad smell.

The problem is that successive chancellors have introduced a whole range of special exemptions and tax breaks for favoured groups.

As a result, the tax code has become almost impossibly complex. It now runs to more than 20,000 pages and includes more than 1,000 special tax breaks. The Hong Kong tax code in contrast runs to fewer than 300 pages.

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This provides plenty of loopholes where unscrupulous people and their clever advisers can hide their cash.

Here’s a suggestion: why not get rid 
of all the special exemptions and tax breaks, radically simplify the tax code and use the money saved to reduce 
taxes?

We may find that the amount collected in taxes actually increases because it is not worth the while of rich people to employ clever accountants to dodge tax.

That certainly seems to have happened when the Government reduced the top rate of tax from 50p to 45p in 2013.

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Labour predicted this would cost the Chancellor £100m a year. In fact the amount of tax collected from higher rate taxpayers actually increased by £8bn a year.

Greek gift to Brexit

I TOOK part in a debate on the EU referendum at Leeds Beckett University this week and came away pondering a few connected points.

According to opinion polls, students and young people generally are more likely to favour the EU than older groups, but the degree of Euro-scepticism on display surprised me.

One reason for this can be summed up in a word – Greece. The Greek implosion may not be a major issue for mainstream voters, except to demonstrate the ongoing catastrophe that is the euro, but for a certain demographic – younger people who consider themselves progressive – it is a big deal.

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The bullying of Greece, the undermining of its democracy and the destruction of its economy by the EU has not gone down well on the left. Every time the pro-EU crowd talk about solidarity, workers rights and the social protections guaranteed by the EU, you can see left wingers thinking: “Oh yeah? What about Greece?”

Amongst this sector of society, the issue of Greece is absolutely toxic and perhaps this partly helps to explain the lack of enthusiasm for the “In” campaign and its lacklustre performance so far.

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