To not understand tax havens and loopholes?(16 Posts)
I I understand they exists and roughly that they allow people to pay less tax than they would otherwise. I don't understand what the loopholes are and why they haven't been closed up?
I am with you. My eyes just glaze over when this stuff gets mentioned.
All I know is I feel like all my wages are used up paying tax
There's a lot of different loopholes, and a lot of very clever people with even more time to invest in finding new ones. They will pretty much always be one step ahead of HMRC because it is in their interest to do so. HMRC has a lot of other responsibilities to deal with, so can't concentrate all its efforts on tax havens.
Plus, not all loopholes can be closed - we can't stop people moving money out of the country. Oh, and the private industries who create and exploit these loopholes have a lot of money to spend on acquiring very experienced HMRC experts, and using their knowledge to further exploit the situation.
* we can't stop people moving money out of the country*
we used to do before Maggie got in!
we can't stop people moving money out of the country.
We used to. One of Camerons justifications for the Panama trust was that it was setup just after the UK abolished currency controls.
However, wherever you put restrictions, you also put opportunity for criminals.
If you have trouble sleeping ...
The thing is HMRC can't do anything about the laws of other countries. The government can express their disapproval of tax havens but can't force them to impose new / higher rates of tax.
The best way to discourage people from using offshore tax havens would be to reduce tax overall. That way, lower taxes would be a reality for everyone and not just for those rich enough to afford creative accountants.
Strangely, though, people seem to be against this. So we end up with tax competition instead, and the unfair situation where people whose money comes from work pay through the nose and people whose money comes from capital just move their capital to lower-tax jurisdictions.
If we were to live in a world with no tax, we would also live in a world with no roads, no railways, no education, no military, trident etc, no police, no ambulance service and no healthcare, no emergency housing, no women's refuge, no mental health care, and no basic fallback support.
Do you want to live in this world?
People like Othehugemanatee and David Cameron et al, obviously do
People who knowingly avoid tax also avoid human conscience.
Basically (and it's very basically), every country gets to set it's own tax levels. Ours is relatively high.
If you live/work in another country with lower tax levels, you will pay their tax which is a lot less. This meant for companies like Cameron's dad's one, it meant they were better off officially running their business out of Bahamas, including flying all the directors there to do the meetings, rather than hold them in London, and paying taxes in Bahamas (there's not suggestion they didn't pay all due taxes to the Bahamas government), rather than in the UK. (It is a lot more complex than this, it wasn't just about the Bahamas being lower tax than the UK, but also the fund was set up to enable a particular type of investment, which as far as I can tell, wouldn't have been an option if the fund had been run out of London - I don't understand all this bit!)
There are a lot of "loopholes" and technology improvements have helped increase that (by making it easier to run a company from another location), the government is tryingto tighten them up, but it'll be always tricky, and rich people will always look for ways to pay the minimum amount of tax they have to.
We are also hampered by the ridiculous complexity of UK tax and national insurance - and no-one at HMRC has any interest in changing that. That's why HMRC helpfully administered tax credits - yum, more complex admin.
Some of the "loopholes" are designed to assist small companies and start ups.
A friend has a very small company, with no ambitions to expand or make millions. It pays staff and themselves. Apparently some of the so called "loopholes" means staff get paid a better wage as the tax is better distributed or something.
Dinosaur is correct. The fund would have been impossible to run out of London so it was set up and run ultimately from Dublin (like a lot of pension fund and ISAs)
The fund was not intended or able to be used as a tax dodge, It was a fund that would invest your money in all sorts of strange places, american pork belly futures? Colombian Mining stocks? Then you need a fund like that.
It was registered with HMRC and freely available in the UK. You could legitimately phone up your bank and ask to buy shares in the company.
The purpose of the fund was to play all these interesting stock markets and make money, all of which was paid in dividends to the owners (ie. the people who invested). This money was sent, with HMRCs knowledge to them in the UK who paid full taxes on it.
Please can we drop the idea that this was in any way a tax dodge. Investing in it did not reduce your tax liabilities one bit.
However, perhaps using a front company to receive monies and avoid £1000 a week in tax and have the front company prosecuted for tax failings is more the kind of thing we should look at. Ken? Ken?
Ophelia that would include everyone with either a pension or an ISA!
oh and this is why if you go to Luxembourg, you'll find lots of young British graduates working for American companies who want someone who can work anywhere in the EU, have English as their first language, but the company doesn't have to base it's European main office in expensive London (often will have a London office as well, but run as much as they can through cheaper places, ideally enough to be classed as HQed there - the Luxembourg government often will do tax deals with these companies so they pay even less than local companies in order to attract employers, it's a strategy that's really worked for them, even though it's sort of screwed the rest of us over).
The staff are also paying fuck all tax, so even officially earning less than their contempories in London, end up with a lot more take home pay. (another bonus for companies HQing there, their wages bill can be a lot lower for the same calibre of person)
Different countries have different corporate tax rates. If you're a millionaire or billionaire a 5% savings can be very good for your company. If you register a person or group of persons as a company in these places you too can benefit from a slightly lower tax rate.
But the person who uses these exemptions still would pay some taxes in their home country just on a lesser amount.
Setting these plans up is complex and not worthwhile to everyone.
A person who gets paid a large sum on an irregular basis think a specialist consultant might find this worthwhile, but it isn't worth the bother for most people (legal fees to set these up is very expensive).
The "people" who involve themselves in these plans really are small fry and probably have done so with legal support. Big corporations might be said to lack morals but the proceeds of crime and outright theft by unscrupulous politicians (not DC, think third world nations that have rampant corruption) should be targeted, drug crimes money should also be hunted.
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