Jeremy

Part of what shapes my views is knowing a number of people who have been on benefits for over a decade, and hearing them say how they don't want to work unless forced to. A couple of them, though offered more work, choose not to accept it because of the "benefit trap" (would lower their income) but also they don't see why they should, preferring instead that "they" (i.e. that's us taxpayers) fund their lifestyle.

I accept the benefits trap is not of their making, but it's something I'd like to see changed. Despite what you might think, I am in favour of a benefits system. We should not have people literally starving. However, our system has grown far beyond that to the point that people who could work are better off not doing so, and we're funding that.

Clive

Prof Eman

Regarding the tax abuses you mentioned.

I'm not going to comment on the banking one, just don't have any idea of the complexity of tax regulation covering international firms. What I will say on this is our tax system is way too complex. It's no wonder accountants etc. are always finding loopholes, some of which are a little too close to the legal/illegal boundary.

I find the issue of service companies a rather interesting one, going by the recent cases involving people working for the Civil Service. Listening to the government, one would think people were doing something wrong (some might still think that was the case).

To me, it's quite complex. We start with

-rules dictating how many employees a firm must employ. Don't know if it's changed, but there used to be a minimum of one. If individuals set up companies that follow the law, they've done nothing wrong.

-tax law that says companies pay less tax. If people form companies that pay corporation tax, as well as personal tax, and that turns out less than paying simply personal tax, they've done nothing wrong

-Companies (or the Civil Service) often want to employ people for a period of time (months to years), but - critically - don't want to employ them as such. If they employ them, they have to give the person employment rights, pay employers national insurance, possibly provide a pension, give them paid time off, paid illness, possibly pay for training etc. This doesn't make sense for the employing company if they're only going to employ the person short-term. Hence, the company wants a way around that.

-so, Mr A wants to work for Company X (or the Civil Service, whatever) for that short-term contract, but Company X tell him 'we won't take you on as an employee'. So, Mr A asks his accountant how to do this and gets told 'set up Mr A Ltd, make yourself the sole employee and get Company X to sign a contract with Mr A Ltd, with Mr A Ltd providing an employee (you, Mr A)'

-now, Company X is happy, as Mr A gets provided to that for that short-term contract via Mr A Ltd, but Company X does have to pay employers NI, no employment rights (Mr A is an employee of Mr A Ltd, not of Company X), no pension, no training, no pay if you're not working, sick etc. Mr A is happy because he's got a job. Often the pay is better, as it compensates for no employee rights, paid holiday etc etc.

-(I know this model of work as I used to do freelance computing some 10+ years back through a company where I was it's director and sole employee).

-for the goverment to suggest they didn't know this was happening is simply false. The Civil Service had to be signing agreements with Companies, not individuals. If the Civil Service had wanted to take these people on as "regular" employees with the employer's obligations that go with that, they could have.

(HMRC certainly used to have a rule - IR35 - where they would try to spot "disguised employees". i.e. people acting as a regular employee, but working via a firm)

So, do I think anybody is at fault here ? No. The model suits both parties and they're both obeying the law.

My basis premise is - the government/HMRC define "the game" (employment/tax), write the rules, appoint the referees and judge the results. They seem to get upset sometimes when others read the rules and understand the consequences.

I don't believe there's any obligation on individuals or companies to pay the maximum amount of tax the rules allow for, quite the reverse - I'd expect them to seek to pay the minimum that the law legally allows for.

Much as, if you wanted to save for old age and consulted an accountant, you'd probably expect them to mention ISAs and Pensions due to the fact you'd pay less tax. That's not wrong, it's simply understanding the rules of the game.

If the government/HMRC want to avoid this sort of thing, they need to reduce the number of rules (and their take) massively. Then people wouldn't spend so long searching for ways to pay less tax, a) it wouldn't be possible, b) it wouldn't be a beneficial use of time

Clive B

I accept that there are some people who prefer life on benefits to working. I don't see how they can live comfortably on benefits without some element of fraud because benefits are so low.

Two questions:

1) Should the majority of claimants who really are living in poverty endure benefit cuts to punish the abusers?

2) Who would want to hire the sort of abusive layabout you describe?

On taxation, it was established several hundred years ago that a man may so arrange his affairs as to minimise the incidence of taxation. That is called avoidance and is legal. Not declaring or lying about income and assets is evasion and illegal.

Cameron / Osborne apparently want to stop civil servants and their employers using legal avoidance measures. This will simply transfer cash from employer departments to HMRC and increase the cost of running some departments. Which is cretinous.

Clive B

I agree with most of your last post except the bit about restricting various benefits and allowances to the very poor. Not the moral judgement behind it but the practical implementation. Means testing is expensive to administer, frequently unfair in practice and causes the same complexity that is the bane of the tax system. Better to give child allowances to all, subsidise nurseries for all, subsidise the NHS and education for all and then recoup the cost in progressive taxation. This appears simpler and simpler is usually better.

Clive
I find your definitions of right wing and left wing somewhat confusing. Please give your definitions.