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Super-rich paying no Income Tax

By Chris V. Thangham     Jun 23, 2007 in Crime
Among the super rich in Britain earning more than £10 million, only 17 percent pay any income taxes. Some say their rich colleagues should pay more taxes, while others say, the rich take too many risks, hence deserve a break.
Only a fraction of Britain’s super-rich are paying income tax, the Standard revealed yesterday. At least 400 UK-based individuals earn, or are capable of making, £10mn a year.
Among them only 17 percent paid income tax according to the figures obtained under the Freedom of Information Act. The remainder use sophisticated legal techniques and loop holes to pay no taxes.
According to an analysis by the London Evening Standard, it is estimated nearly £2 billion a year was lost in 2004-2005.
The revelation will place more pressure on Gordon Brown to close the loopholes that have made Britain a leading tax haven. One private equity partner has admitted that tax breaks mean he pays a lower rate than his cleaner.
Treasury figures obtained by the Standard show that 65 people who filed a tax return in 2004-05 declared a taxable income of £10 million or more.
The Sunday Times Rich List said there are more than 350 people in Britain with a fortune of at least £200 million, which can generate a return of £10 million a year through dividends, interest, rents and profits. Some of the rich include David Beckham, Sir James Dyson, Sir Elton John and Harry Potter author J. K. Rowling, who are also regularly in this “eight-figure club”.
Liberal Democrat Treasury spokesman Lord Oakeshott said:
These devastating figures prove that the richer you are, the less tax you pay in Brown’s Britain. Gordon Brown won’t get a grip on rich men’s tax-dodging when close adviser Geoffrey Robinson used offshore trusts and Sir Ronald Cohen (who bankrolled Brown’s leadership campaign) conceals whether he is domiciled in Britain for tax purposes.”
For Britain earning more than £1 million a year paid a total of £4.6 billion in tax in 2004-05, a tax rate of 35.9%. Most of that was paid by the “poor rich” who earn just seven figures.
The top 1,000 richest people in Britain are worth a combined £360 billion, with average annual earnings of around £18 billion. If they paid taxes it will amount to £6.5 billion in taxes. But they are seldom paid by the rich.
Although the biggest single tax loophole, non-domicile status, is under review by the Treasury, the government under Tony Blair has been reluctant to order a clampdown for fear of damaging the City and the economy. Other loopholes have been closed only for another to open up.
While some of the Super rich like Sir Ronald, who is estimated at £260 million wants his colleagues to pay more taxes, other executives like Guy Hands of Terra Firma say they take too many risks and hence deserve a break.
One senior accountant who helps the rich in avoiding taxes said a lot of the rich would rather keep the money themselves and use it to issues that affect them. They feel like if they give it government it won’t be spent on stuff that they agree with. Even though avoiding taxes costs them money in accounting and other costs, it still saves them a large amount of money, which they would have lost in taxes.
Wonder how much taxes, J.K. Rowling and David Beckham will pay? The figures in London can be seen here also, majority of the taxes paid comes from either low income or middle classes. The rich usually avoid taxes with their off shore accounts and similar tax avoidance practices employed by their fellow rich in Britain.
How is the best way to handle this problem? One time I read, it advices to just charge a flat tax on spending and remove the tedious and costly tax filing procedure.
More about Super-rich, Paying, Income tax
 
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