Tax evaders

[RogerS]

Hi

Personally, I'd like to see an end of VAT and the introduction of a 'Sales Tax'. This would hopefully start to deal with the biggest tax avoiders namely Amazon, Google etc.

However, as usual, it must be stated that there is nothing that any human creates that another can't find a way of circumventing (well almost)

Phil

eh? VAT and Sales Tax are both taxes on end consumers - how is changing from one to the other going to alter the tax paid by Amazon, Google etc? Serious question - I am not a tax expert!

VAT on things the like of which Amazon sells is, as far as Amazon is concerned, cash neutral. They buy a book that costs £100 + £20 VAT. They claim back the £20 VAT. They then sell it for£200 + £40 VAT. They give the £40 to the VAT man. Vat man is £20.

So far so good. But Amazon has made £100 profit but not taxed on it.

So get rid of VAT. Amazon buys a book for £100. They sell it for £200 + £40 Sales tax. Their Corporation tax is based on the value of their sales.

 

[Noel]

RogerS wrote:
VAT on things the like of which Amazon sells is, as far as Amazon is concerned, cash neutral. They buy a book that costs £100 + £20 VAT. They claim back the £20 VAT. They then sell it for£200 + £40 VAT. They give the £40 to the VAT man. Vat man is £20.

So far so good. But Amazon has made £100 profit but not taxed on it.

So get rid of VAT. Amazon buys a book for £100. They sell it for £200 + £40 Sales tax. Their Corporation tax is based on the value of their sales.

Bit of a flaw in that particular example Roger.

 

[Jacob]

Not necessarily anything directly to do with the list mentioned but here's what you can currently do:

Set up a business.
Register for VAT.
Register as self employed
Register for self assessment (income tax)

Assuming you have a reasonable business that trades and takes money at good profit from customers or even rips off every customer that goes near you, you can continue doing so for 12-18 months keeping all the VAT and not paying income tax before closing down, starting a new project or whatever.
There is simply not enough safeguards or staff at HMRC to police the system effectively.

The other end of the scale, and totally legally, is to pay tax on 150 odd million of profit at 2% or so, get a few bad headlines for a day or so and do it all again the following business year.

The money laundering capital of the world that is London, and increasingly other UK cities, is a another story in itself.

This is why income and property taxes are effective - in both cases difficult to hide, however come by in the first place.

 

[sammy.se]

Only for PAYE.


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[Jacob]

Only for PAYE.


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Well yes but also if people seem to be buying stuff the tax man can ask to see where the money is coming from, particularly with property where taxable ownership goes down on the Land Registry. If tax not forthcoming in due course, then appropriation of the land! Soon sort the pippers out!

 

[Rorschach]

I really wish we could get a simplified Tax code to make things fairer for all involved.

The way things are at the moment the more tax you have to pay, the more ways there are to avoid paying it and there people who pay proportionally the most are those who have the least money.

I also get very annoyed at those who chastise people who use perfectly legal loopholes to avoid paying tax, I highly doubt those criticising would not do exactly the same thing if they could.

 

[sammy.se]

I really wish we could get a simplified Tax code to make things fairer for all involved.

The way things are at the moment the more tax you have to pay, the more ways there are to avoid paying it and there people who pay proportionally the most are those who have the least money.

I also get very annoyed at those who chastise people who use perfectly legal loopholes to avoid paying tax, I highly doubt those criticising would not do exactly the same thing if they could.

Spot on.

 

[profchris]

So get rid of VAT. Amazon buys a book for £100. They sell it for £200 + £40 Sales tax. Their Corporation tax is based on the value of their sales.

That's not how Corporation tax works - it's levied on profits. So Sales tax would still be deducted before calculating tax.

The real problem here is which country gets what share of the corporation tax. For Amazon's UK sales, much of that currently goes to Luxembourg. There is international agreement on how to allocate the taxing of profits where they are made from cross-border activities, in the OECD Model Tax Treaty, but they don't work at all well for online activities. But changing the treaty is hard because the potential losers won't agree on change! Plus all the solutions posed over the last 20 years are equally as bad as the current system.

Fortunately I have an excellent PhD student working on exactly this problem at the moment - her solution is an interesting one, but securing political agreement between countries to adopt it, or any other solution, is the big difficulty.

BTW, the books example is not a good one, because I'm pretty sure Amazon pays UK corporation tax on some or all of its book sales under the current rules. The hard question is profits from the sale of advertising, analytics, etc, especially where services (like Google search) are "free" to users. And that's made more complicated by the other hard question - profits are income minus expenses, and it costs to build all the IT systems etc (almost all of which happens abroad), so how much of that is an expense of UK sales?

All tax systems trade off simplicity against fairness and economic objectives. Thus there is no UK VAT on hard copy books (encouraging reading for economic development through a more educated population) but there is on e-books (historical accident, too hard to fix). A land tax might be seen as unfair on pensioners who are forced to move house to pay it, but it's nice and simple. And so on.

It's a highly complex system which isn't just about tax revenue for countries, so anyone who claims to have discovered the single answer is certainly wrong!

 

[Jacob]

...... A land tax might be seen as unfair on pensioners who are forced to move house to pay it, but it's nice and simple. .....

Could be pay as you go, or pay when sold, or post mortem as death duties.

 

[profchris]

Could be, but then how do you transition to a tax system where your receipts aren't going to come in for another 20+ years if post mortem (I hope for me), or cope socially with a tax system which could mean I can't afford to retire to a smaller house if payable on sale?

And I see someone else said it could replace every other tax - calculations please! What percentage of land value is needed to replace all current tax receipts? And the tax will surely affect land prices, so include estimates which take that into account. I see the UK income tax receipts were £811 billion in 2014/15 and NI contributions £135 billion, total £1,026 billion. Assuming 20 million households, that's an average land tax of around £50,000 per household. That seems huge, but the top 5% of earners pay around 90% of all income tax (from memory, it might be the top 10%).

Like I said, it's a complex system with no single solution.

 

[Woody2Shoes]

Having read the Guardian article about how little checking is done by Companies House in setting up companies, I did wonder if HMRC's naughty Mr. Muhammed Ali and Mr. Ronald McDonald could in fact be aliases....

Cheers, W2S (aka Mr. Michael E. Mouse)

 

[Noel]

Having read the Guardian article about how little checking is done by Companies House in setting up companies, I did wonder if HMRC's naughty Mr. Muhammed Ali and Mr. Ronald McDonald could in fact be aliases....

Cheers, W2S (aka Mr. Michael E. Mouse)

Can vouch for Ronald McDonald, met him at a birthday party one of the kids went too. Slightly eccentric dress sense, footwear I'm not sure I would wear myself but he seemed a decent, friendly bloke.

 

[Jacob]

Could be, but then how do you transition to a tax system where your receipts aren't going to come in for another 20+ years if post mortem (I hope for me), or cope socially with a tax system which could mean I can't afford to retire to a smaller house if payable on sale?

Yes not simple but those questions quite easy to answer - 20 years wait OK increase rates in the meantime - retire to smaller house have allowance for the purchase of same - rather like Capital gains which is not charged on your principle residence. Yes would affect land prices (down) but this would be a boon in the longtime as it would free up land/property for those who need it reducing the artificial shortage, the speculative element and undeserved capital gains currently keeping prices up

And I see someone else said it could replace every other tax - calculations please! What percentage of land value is needed to replace all current tax receipts? And the tax will surely affect land prices, so include estimates which take that into account. I see the UK income tax receipts were £811 billion in 2014/15 and NI contributions £135 billion, total £1,026 billion. Assuming 20 million households, that's an average land tax of around £50,000 per household. That seems huge, but the top 5% of earners pay around 90% of all income tax (from memory, it might be the top 10%). .....

On those figures, the 242495 sq km of UK would need to bring in £4.20 per sq.metre (according to quick google and dabble with calculator so could be hopelessly wrong!)
In other words gross oversimplification but a viable scale of magnitude on the basis of land alone, but then it would be collected from other sources too - "the top 5% of earners pay around 90% of all income tax" and many others.

Like I said, it's a complex system with no single solution

The more solutions the better; catch all, spread the burden etc

 

[Trainee neophyte]

I'll go back to what I said before: we are using an antiquated idea as to what "money" is. The idea that money is a scarce resource, and can not be created at will. This is NOT the case - all money is now created out of thin air, as required. There is absolutely no need for anyone to pay tax, in order to fund the government's profligacy. The government could just create the funds needed, which would increase the money supply. If they create too much, there is inflation as too much money chases a fixed supply of goods. Currently tax is used to manipulate the money supply - every time there is a recession they reduce taxes to "boost the economy", or in other words increase the money supply. If the economy starts to "overheat", then they increase either interest rates, taxes, or both to reduce the velocity of money.

You would probably want to remove the banks' monopoly on creating new money, which means that this system would never be implemented.

 

[RobinBHM]

No, it isn't. Think about it. If you put a land tax on then who is going to be able to afford to buy the land that people will now be wanting to get rid of ? Suddenly that land has zero value.

or do you mean a tax on gardens ? Allotments

It is actually based on sound economics.

Land Value Tax is well supported by economists and actually by politicians.

The media have derided it as simply a 'garden tax', but is much more clever in the way it works.

The simple argument is that if you tax land you make it more productive and available for use by more people.

LVT is a solution to the housing crisis in this country so it will get considered more as that crisis deepens.

I know LVT seems a wacky idea by the Left, but the Right have given it consideration.

The problem in this country is that property is used as an investment to make money.

 

[RogerS]

...... A land tax might be seen as unfair on pensioners who are forced to move house to pay it, but it's nice and simple. .....

Could be pay as you go, or pay when sold, or post mortem as death duties.

Rubbish. We have no children and so when we die any specious argument about inheritance tax goes out the window.

Instead we are leaving all our estate to specific charities that we have researched. I'd rather that then give a bloody great slice to the Govt to be wasted on futile things.

 

[RogerS]

....
In other words gross oversimplification .

Just about sums up your post. See my other reply.

 

[RogerS]

....
LVT is a solution to the housing crisis in this country so it will get considered more as that crisis deepens.
....

Over-breeding and unrestrained immigration is also a solution.

Back to LVT...how are you going to define 'land' ? Back garden? Farmer's field ? Moorland...Pie in the sky to think that you are going to wave a magic wand by usurping land to build houses on. Little things like missing infrastructure ...

 

[Jacob]

...... A land tax might be seen as unfair on pensioners who are forced to move house to pay it, but it's nice and simple. .....

Could be pay as you go, or pay when sold, or post mortem as death duties.

Rubbish. We have no children and so when we die any specious argument about inheritance tax goes out the window.

Instead we are leaving all our estate to specific charities that we have researched. I'd rather that then give a bloody great slice to the Govt to be wasted on futile things.

Rubbish

 

[Jacob]

....
LVT is a solution to the housing crisis in this country so it will get considered more as that crisis deepens.
....

Over-breeding and unrestrained immigration is also a solution.

Back to LVT...how are you going to define 'land' ? Back garden? Farmer's field ? Moorland...Pie in the sky to think that you are going to wave a magic wand by usurping land to build houses on. Little things like missing infrastructure ...

Rubbish