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348 – Cut the cringe
04 September 2011 (17:47:38)

It’s time for the government to stand up to Britain’s selfish rich, says Matthew Oakeshott

“It’s time for our government to get serious about shared sacrifice” – Warren Buffett.

Liberator articles don’t often start with a quote from a fat cat, but this one from the world’s third richest man is spot on today, in Britain as much as America.

His point is that capital is taxed much more lightly than income – his effective tax rate at 16% is only half the average for US taxpayers. Many of France’s business leaders and wealthy have called for an exceptional contribution from the wealthiest taxpayers to show solidarity and help close the deficit in the public finances.

But Britain’s super rich are super selfish in a world of their own – not a peep from them about shouldering their fair share of the burden of rebuilding our economy, after the boom that made so many of them their fortunes.

All we hear is an endless whine about the disincentives from our so-called high rates of tax, with the 50p rate on taxable incomes over £150,000 their top target. This is encouraged by a steady stream of noises from the Treasury, and Tory ministers suggesting, that this raises very little extra tax, well before any evidence is produced to justify that highly improbable assertion.

Eric Pickles, as ever the real unacceptable face of Conservatism, has said he wants to abolish the 50p rate and put nothing in its place – no mansion tax, no wealth tax, no reformed council tax. He really is the fat cats’ friend when he sees nothing wrong with a banker in a £30m mansion paying just £5 a week in property tax – the same as for many suburban semis. Never mind the poor, this isn’t even standing up for Middle England.

It’s high time we put fairness back at the centre of our economic policy – it’s there on the front of our coalition agreement.

But when did you last hear a Conservative stress it? We’ve made a good start taking the lower paid out of income tax, and getting the tax threshold up to £10,000 by 2015 must be a Lib Dem ‘must do’ – an achievement that we can sell with pride, knowing that it helps millions. Somehow, the rich forget incentives matter even more at the bottom than at the top, and the lower paid face mountainously high effective tax rates.

But we’ve bottled out on real action to end the array of abusive tax dodging scams by the rich, and HMRC is hopelessly overstretched and ill-managed.

There are still far too many coach and horses-sized tax loopholes for the rich, and their accountants, to drive through while the taxman struggles behind. A key way to ensure that higher-rate income tax raises serious money is to limit tax relief for pension fund contributions to the standard rate. Why should 300,000 people – the top 1% – get a whacking great subsidy from ordinary taxpayers?

There are two pieces of serious unfinished business from George Osborne’s first budget if he is serious about making the rich pay their fair share.

He let non-doms off the hook. By letting them bring any money they want into Britain tax-free, they now have the best of both worlds, by letting the income and capital gains roll up offshore while getting all the benefits of living in Britain for a nominal flat charge, a mere flea bite.

In his 2007 Tory conference speech, Osborne claimed this would raise £3.5bn a year to cut inheritance tax and stamp duty. In fact, last year it raised just £168m, only 5% of his claim. It must have been the biggest con ever in a Conservative speech – not an award to be made lightly. We Lib Dems have a single non-dom policy – after seven years here, you pay full British tax on all your worldwide income and assets or you’re out – it’s only fair. No other civilised country gives this outrageous tax bonanza.

On stamp duty, the Chancellor highlighted the widespread abuse at the top end of the market, where almost all owners of properties over £5m get away with stamp duty at 0.5% instead of 5% by packaging them up in companies, but he did precious little to stamp out the abuse.

Strip away the sham companies and charge full stamp duty on the property inside the wrapper. And if ownership is hidden offshore, charge a stiff annual tax on the capital value of the house, until the real owner is revealed!

Catching the millionaire stamp duty dodgers is a simple test of fairness because, as with a mansion tax, you can't move your property offshore to dodge stamp duty if it’s properly enforced. We must also end the scandal of foreigners and non-doms dodging capital gains tax on their British properties by hiding them in tax havens.

There’s far more for any government to do to make Britain a fairer country. But getting to grips with these scandalous abuses in our tax system would be a great start – and show the world it’s not only America and France where the rich can be made to pay their fair share for the common good.

Britain is crying out for a government that stops cringing to bankers’ and businessmen’s greed.

Matthew Oakeshott is a former Liberal Democrat Treasury spokesman in the House of Lords

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