1950: Treasure Island – Haskin

I have to admit to being a little amused by some of the comments in the media about offshore tax havens. Most amusing of all is the political nonsense that seems to gush from every quarter. Politicians have known that offshore investing and saving is available and has been for many years. HMRC has the role of collecting tax and interpreting the laws agreed and set by the Treasury. These need to be democratic, so that we don’t have a country that is effectively a tax dictator.
Government (and it really makes no difference who is in power) tweak and tinker at the edges, claiming that they are making adjustments for our general good. Governments attempt to encourage or discourage investment, to encourage or discourage enterprise. Now we may be entering the realm of political philosophy, but the purpose of this exercise is to find a balance for all citizens to live in a degree of harmony, rewarded for enterprise and not rewarded for laziness; providing good care, education etc for all of us and a welfare state for those that are truly unfortunate.
An element of financial advice will consider reducing or minimising someone’s tax. This can be done to varying degrees depending upon the complexity of the person’s affairs. So an ISA is a tax avoidance – of future capital gains and income tax. A pension is a tax avoidance, in that there is a tax reducing element (tax relief) to encourage saving and there is a tax free lump sum upon retirement. The scale of products or solutions grows. Placing money offshore can be perfectly legitimate as a place to hold funds, but once they are returned (repatriated) to the UK tax might be payable (depending one the personal allowance etc).
There are of course all sorts of offshore schemes that are deliberately set up to minimise tax. These invariably carry other problems (for example, not being tested in law – so the tax avoidance may prove pointless). You can also find that the investment is plainly “rubbish”.
If politicians were genuine about wanting to change the tax system they could do so easily. All that we need is a single rate of tax. At the moment there are volumes of tax rules. There are lots of tax rates. Taxing income, gains, profit, dividends, inheritance, and so on. It is a badly thought through system, providing motivation (legitimately) to find a way of reducing tax on “income” depending how the income is derived. This is not a difficult problem to resolve. All income earned in the UK should be subject to UK tax, all income and assets bought in the UK should be subject to UK tax. A single tax rate would work. It is fair, it is proportionate. So there’s my challenge to HMRC, Treasury and Parliament.
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