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Offline Victoria Sponge

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tax loop holes for the rich
« on: Sep 14, 2007, 10:12 »
Jus t read this and thought the rules rather shocking

Billionaires and their taxes
By Nick Louth  September 13 2007

If you are on the average national salary of ?25,000, you will pay 20% of your income in tax. If you are just getting off a benefit like Job Seeker?s Allowance into a minimum wage job, your marginal rate of tax will be close to 100%, as housing and council tax benefits are withdrawn.

But if you are a billionaire living in London, who spends much of your time abroad, Her Majesty?s Revenue & Customs won?t ask you for a penny of your income.

You will pay stamp duty on your house purchases here, council tax, VAT and duty on purchases made here, the London congestion charge if your vehicles are registered in the UK, and a variety of other levies. But nothing on your income or capital gains, whether UK-derived or not.

The oddly lax domicile rule Is that right and sensible?
The domicile rule, that is the rules on where you are based for tax purposes, is different in Britain to many other countries. Domicile is different from the legal definitions of citizenship, nationality or residence, and can be suprisingly elastic.

See how much tax you pay per month
The billionaire Indian industrialist Lord Swraj Paul is owner of the Caparo group, an active member of the upper house, a Labour party donor and chairman of the Olympics Delivery Committee. According to Wikipedia he has made his home in London since 1966. However, he is not domiciled here and pays no income tax.
Nor does Russian billionaire Roman Abramovich. Despite owning flats worth ?17m in Lowndes Square, Knightsbridge, a ?10m home in Belgravia and a ?20m estate in Sussex, the Chelsea football club owner says he doesn?t live here. He is still resident in Moscow for tax purposes.

Complications, inevitably
Things can get a little more complicated though, as is inevitable when taxes are involved. Sir Philip Green, of BHS and Arcadia fame, is resident in the UK for tax, though he actually lives much of the time in Monaco. However, before HMRC starts rubbing its hands with glee, they should realise that Sir Philip isn?t worth as much as we might imagine.
Most of his businesses are actually owned by his wife Tina, and she is domiciled in Monaco. When these generated a ?1.2bn dividend in 2005, Tina Green didn?t pay any income tax on it because Monaco doesn?t tax dividends.
Billions lost to the Treasury

Setting justice aside, how much of a problem is this for the tax authorities? Treasury figures for 2005, the latest available, show a 72% surge in individuals registered as non-domiciled to 112,000. However, tax accountants believe there are perhaps 10 times as many who are using non-domicile status to get around paying UK tax.

How much the Treasury loses is open to debate, but is likely to be in the billions. In 2004, only 65 individuals in the UK declared a ?10m or greater income, according to figures obtained by the London Evening Standard. Yet according to the Sunday Times rich list, there are more than 400 UK based wealthy individuals worth ?200m or more.
Though it is hard to compare income and wealth, (especially as there are dozens of tax schemes to turn income into capital gains) at least some of those should be earning the minimum 5% return on their wealth which would produce a ?10m income on a ?200m sum.

A monstrous tax loophole
Given that we have a Labour government, it is suprising how gingerly it has moved over tightening this Mersey Tunnel-sized tax loophole. After all, even Mrs Thatcher had planned to tighten the domicile rules in 1988, until Norman (now Lord) Lamont persuaded her against it.
In 2002, London-based Greek ship owners threatened to move to the Greek port of Piraeus if rumours they might lose their non-domiciled status were true. The Baltic Exchange, which sells freight futures, warned that 4,500 City jobs would in turn be threatened.
Yet given the costs involved in moving, fears that these highly mobile business people would simply shift themselves abroad if they started to pay any taxes on their incomes are surely wide of the mark.
The details of domicile
HRMC defines domicile as the country to which the taxpayer will ultimately return. However, as Liberal Democrat Treasury spokesman Vince Cable has suggested, "all you need is one overseas grandparent? to claim that as your domicile.
See HRMC?s rules on the issue
Anyone who is both resident and domiciled in the UK must pay tax on their income, whether it arises in the UK or abroad. But residency is closely defined. If you claim foreign domicile, and do not spend 183 days in any one year in the UK or an average of 90 days a year over every four here, you are not resident for tax purposes.
There are a number of ways that the domicile rules could be tightened up:
By limiting the number of years anyone could reside in the UK and claim to be non-domiciled.
By cutting the annual days allowance sharply, to bring more into the residence net.
By introducing a lower rate of income tax, say 15%, for non-domiciled.
By tightening up the remittance rules, a curious loophole which allows non-domiciles to bring capital into the UK without being taxed while income is.
A combination of the above measures
Other countries offer a number of examples. In the US, only a limited sum can be earned as a non-domicile before income taxes kick in, while in Japan you are charged tax on the same proportion of your income as the portion of your time spent in the country.
Whatever the method used, it is surely right and proper that when the rest of the country is paying taxes, that the wealthiest should too.


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Offline Durham Forum

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Re: tax loop holes for the rich
« Reply #1 on: Sep 14, 2007, 10:47 »
What, and take their foot off our heads? That's what the little people are for - footrests and doormats for the great and the good. Rich people will never cut their own throats.

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Klendathu

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Re: tax loop holes for the rich
« Reply #2 on: Sep 14, 2007, 13:06 »
Money always goes to money:-(

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Offline Victoria Sponge

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Re: tax loop holes for the rich
« Reply #3 on: Sep 14, 2007, 14:17 »
my money's gone to Tesco to replace my daughters laptop.

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Klendathu

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Re: tax loop holes for the rich
« Reply #4 on: Sep 14, 2007, 15:24 »
Please tell me that you did not buy one of them god-awful laptops from Tesco?  Hope you didn't they are a crap spec for an equally crapper price.  Although I assume when necessity and urgency are there anything is better than nothing.

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