Many moons ago I worked for snooty investment company in The City, our job was to make clients a profit on their portfolios, private corporate or pension. We were pretty good at it: Indeed I won some modest international prizes for fund performance, albeit in the Cinderella fixed interest side of the business.
Our clients were Footsie companies, the great and the good and celebrities. We managed portfolios for an eclectic mix of clients ranging from the Sainsbury family to Andrew Lloyd Webber. They were wealthy enough to retain a battery of other financial advisers whose job was to alleviate the burden on income, capital growth and inheritance tax.
I subsequently became much more involved in this side of the business. Ironically tax relief is more important to most clients than capital growth, such is the burden of taxation now in the western industrial democracies.
Common and Statute law has long decreed it is both right and proper for any citizen to reduce the weight of tax on himself or his family by any lawful means at his or her disposal. Render unto Caesar that which is Caesar’s. The traditional method in England has been the use of trusts and trust law, a concept many hundreds of years old.
All pension funds are trusts, almost everyone reading this article will have benefited in some way from trusts or will in the future. Various government sponsored savings schemes are designed to save tax. ISAs, VCTs, AVCs: there is a long list but all have the same government approved goal.
In recent years there has been confusion about what is tax avoidance and what is tax evasion. The latter is illegal, rightly so as evasion places a higher burden on those who meet their responsibilities.
Membership of the EU actually promotes establishing a company in the least aggressive tax systems. Consequently, Ireland and Luxembourg do particularly well as low corporate tax environments, which is why most of the billions we spend on roads go to contractors who rejoice in names like O’Flaherty or McGinty. It is also, arguably why their economies do well.
Governments who bemoan companies that pay little or no tax have only themselves to blame: their system is either too complex or too expensive.
Moving onto society, and politicians in particular it is unreasonable to demand tax as some sort of pro bono publico arrangement as if a company should somehow make an ex gratia payment because it doesn’t look like they have paid enough.
Rewrite the tax policy then and get it right.
The chairman of the parliamentary budget committee is of the arrogant and irrational genre, yet her real fault is hypocrisy. Margaret Hodge not only had the benefit of being educated privately she has significant inherited wealth, via, of course, the family trust system.
Before she reaches for her expensive lawyers, who seem to create so much fear in the press and media, her family have acted quite prudently and properly. But she is a serial tax avoider. The difference between her and multinational companies or successful business people is that she enjoys the shield of being a Labour MP and is therefore apparently beyond criticism. I also note she lists herself as a consultant to Price Waterhouse, one of the most prestigious tax consultancies in the world.
I have no idea what qualifications she has for her current role; they certainly do not seem apparent. Perhaps it is simply the ability to look irritatingly sanctimonious.