Thursday, 21 June 2012

Why is Jimmy Carr's Tax Avoidance Not Illegal?

Jimmy Carr was in the news today for using a K2 tax avoidance scheme. This is basically where an individual resigns from their UK job, then signs with an offshore company who receive the individual's salary from the UK company. The offshore company then pay the individual a small “wage” (which they pay a small amount of tax on) and give them a large (tax-free) “loan”

Many people in this country earn minimum wage, yet still have to pay 20% income tax on anything they earn over the tax threshold (currently £8105 per year). Low-income families face a multitude of financial struggles, yet tax avoidance in the high income tax threshold (over £150,000 a year) was as high as 30% last year. This means that some people earning hundreds of thousands of pounds a year are paying less tax than the average UK family. How is this legal?! 

According to the BBC, tax evasion is the criminal act of avoiding paying the income tax you owe, whereas tax avoidance is the legal practice of paying some dodgy accountant to use offshore accounts to reduce the amount of income tax paid by the UK's richest to as low as 1% (much higher than someone earning minimum wage for a full-time job). What exactly is the difference here?? It sounds like two names for the same thing, but if your account does his job well you can get away with it!

The Prime Minister declared Jimmy Carr's tax avoidance “morally wrong” (yet refused to comment on recent OBE-awarded Gary Barlow's use of another scheme currently under investigation by HMRC). Income tax is used to fund vital services like the NHS, education, the police and social security. Perhaps Jimmy Carr and others do not use any of these services (although I can't imagine he wouldn't call the police if his mansion was being robbed!), however do they expect the rest of the country to shoulder their share of the cost of keeping the UK functioning? It is incredibly unpatriotic and, I would agree, morally wrong.

Mr. Carr has since withdrawn from the tax avoidance scheme, calling it a “terrible error of judgement”. I call it ironic, considering his jokes about other people's abuse of the UK economy!

I just hope that the government's plans to stop tax avoidance in the rich goes further than just cutting their income tax rate to 45% (from 50%). Surely that's just going to earn less money from those responsible enough to pay their dues.

What do you think? I am outraged!


keshling said...

I too am outraged and sickened really. I never thought Jimmy Carr was anything other than smug and unfunny and now I think he's a hypocrite too. I had my suspicions when I saw him being such an Establishment brown-nose on the Jubilee concert. All these so-called cutting edge comics secretly want their knighthoods :(

Scarlet said...

David Cameron obviously didn't mind about his own father's squirreling away of money in offshore accounts.The fact he inherited from his late father's will probably tempered his indignation about moral righteousness somewhat.

mabelandmaisy said...

I agree although I'm not surprised! However at least he was paying some tax unlike many of the people I deal with who are the 2nd generation of a family where no one has ever worked and the Benefit system has become a "lifestyle choice" It's us in the middle that work hard pay ALL our taxes and try to save for a reasonable dottage that seem to carry the burden. Sorry, rant over!! Happy Friday :-)

Frugal Living UK said...

I am outraged too. No one enjoys paying tax, but it is just something we all have to do. I'm self employed so it is up to me to do my own accounts and submit a tax return (no one talk to me on tax return day, it is the worst day of the year!) but I am as honest as the day with it and yet you can bet your bottom dollar that if I were under investigation they would probably haul me off for a 50p discrepancy. How do these high earners get away with it? If they don't want to pay tax in this country then they shouldn't live here, simple. Imagine how much more money the country would have for everything if they all paid their way.

SpanktheMagicMonkey said...

Firstly, I do not condone tax avoidance or dodging and I think everyone should do their part to fund the services which we use willing or unwittingly everyday. What I find more fascinating is people’s reaction to these stories. If this had been a normal person working an everyday 9-5 people would generally tut, raise their nose a bit further and scoff a little. However, because it’s THE Jimmy Carr people become instant experts in the blink of an eye and declare worldwide moral indignation on the guy. Yes, he’s been a naughty boy and he should get a slapped wrist and made to pay up the difference. It in no way warrants the level of press attention it has got purely so people can feel a bit smug that they pay their taxes. Funny how they failed to record down all the money he’s ever raised and donated to charity. He didn’t have to.

Dear newspapers, find some real news to report on and not celebrities. Something which actually enriches people a little and not the mindless drivel seventy percent of your news seems to be.

Furthermore, Mr Cameron, screw you, you slimey little excuse for a human being.

Anonymous said...

Dear Mrspankthemagicmonkey

Fantastically put.


Pamela said...

Bryallen, ITA. Unfortunately, it's a thing here in the US as well (though we have many, many loopholes). It makes me livid. No one is too good to pay their share--I have to pay mine and I make and have *far* less than these people. There is no money fairy and there are unpopular, unglamourous things that we need to have and that need to be funded.

saving for travel said...

Just catching up with your posts

JC-What can I say, the rich get richer! The same old story.

Thanks for your gardening tips, passed them on to Mr Sft.

Don't mention slugs. Found 2 INSIDE the cottage recently. Yuck!

Apple and rhubarb crumble looks yummy!

Sft x