The Tax Justice Campaign Falls Flat On Its Face. You’d Need A Heart Of Stone Not To Laugh

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I’m sorry but I just couldn’t help but burst out laughing when I saw this story this morning. So is one of the more po-faced and puritan campaigns of recent times forced to face their own errors, their complete disregard for facts in any of their evidence. It’s here in The Guardian:

The Treasury’s attempt to tax wealthy individuals who hide their assets in Switzerland was declared an embarrassing failure by experts on Friday after the Swiss authorities said it would generate only a small fraction of the expected £3.2bn haul.

The Tax Justice Network campaign group said “giant loopholes” in the deal struck by the Treasury minister David Gauke and former HMRC chief David Hartnett had undermined the UK’s attempt to trawl the Swiss banking system for untaxed funds.

According to the Swiss Bankers Association (SBA), the deal does not apply to most UK nationals who keep their cash in Swiss banks because they are not domiciled in the UK.

To give you the background. There’s been a long running campaign by a small and select group to showcase what they believe to be outrageous tax evasion around the world using varieties of offshore companies and various tax havens. The crew include Richard Murphy at Tax Research, the Tax Justice Network, Richard Brooks at Private Eye and certain journalists (Tom Bergin at Reuters, Jesse Drucker at Bloomberg) seem to listen to their arguments more or less avidly. The claims have most certainly been strident and there is talk of vast sums being hidden from righteous taxation through this illegal use of offshore.

There’s been a parallel campaign about tax avoidance (the legal stuff) but that’s not the point at issue here. The claim has repeatedly been made that nefarious types stick their money in, say, Swiss banks, never tell anyone about it and thus, illegally, get away without paying any of that right and justly due tax.

Well, OK, say that that’s true. What should we do? Well, obviously, we need to go and find out whether it is in fact true. Which is what an agreement between the Swiss and UK governments has done. The Swiss banks have trawled through all the accounts they’ve got of UK nationals and checked whether they should have been paying tax on their money. The answer it turns out is that there were indeed a few bad apples. But very few of them in fact: so few that the actual tax that will be collected is lower than the minimum that it was guaranteed would be collected.

This rather puts a crimper on the claims of the Tax Justice Network, Richard Murphy at Tax Research, Richard Brooks at Private Eye and so on. If there isn’t a vast stash of tax evading money in the Swiss banks, when they’ve been shouting that of course there is, then there’s some problem with their standard of evidence. And we must therefore take all of their other claims with the appropriate pinch of salt. Or even ignore them altogether as being entirely unreliable.

The reason their numbers were entirely wrong is due to a quirk of the UK tax system. If you are UK resident then you pay UK tax on your income in the UK. This is from whatever work you do there but also includes any money you might earn abroad and then bring into the UK. If you are UK domiciled (broadly, but not exactly, someone born in the UK and continuing to live there) then you pay UK tax on your entire worldwide income. As you can see this leaves a gap. People who are UK residents but who are not domiciled there do not have to pay UK tax on their foreign earnings: as long as they leave them in those foreign lands.

When the Swiss went to look at all those accounts held by British nationals they found that instead of there being vast numbers of tax evaders there were in fact vast numbers of resident but non-domiciled and non-UK resident British nationals with accounts. Neither of whom owe any UK tax on the money that they’ve quite legally put into a Swiss bank account. Please do note that this isn’t a flaw or a loophole. This is how the system works: it’s only Americans (and Eritreans) who have to pay home country taxes wherever they live in the world.

But that’s a pretty big mistake for these tax campaigners to have made. Create a fuss, stir up the apathy and then, as soon as we actually test their thesis, we find that there isn’t some large amount of cash that should rightfully have been taxed. This is something that, as I say, should lead to us taking everything else they say a great deal less seriously.

Just to add to the joy here’s the Tax Justice Network on this finding:

(And if a “non-dom” doesn’t have to report their non-UK sourced income, then we wonder what is the point of then hiding their foreign assets in a Swiss bank?)

Because if you put them in a British bank then you’ve brought them into the UK and must pay tax on them! Blimey….

Of course, the campaigners have come out fighting. Shouting that there’s not much tax to be had because the government went about all of this in entirely the wrong manner. Which is an interesting defence: but not one that really works. For the only reason the government ever tried to do anything about this at all is because these same campaigners have been shouting that there really is a pot of gold to be had by cracking down on such tax havens. And, as we’ve now found out, there isn’t. They’ve managed to destroy their own case, something which I admit I find quite delightful.

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