By Carole Dennett
DH has taken a few days off to experiment with expanding foam and to rest, having correctly filled in his tax return, leaving the keys to his laptop to me.
In what is no surprise to anyone, the Conservative party chairman and briefly Chancellor of the Exchequer didn’t follow DH’s lead and fill out his tax return properly. He claimed that he “forgot” he had incurred £3.7m in tax liabilities (£4.8m after a penalty was added) on the sale of his shares in YouGov. An easy mistake to make; perhaps he too was experimenting with expanding foam, but did he do anything wrong? Spoiler – yes, he did.
What is surprising is that more than 20 million adults in the UK, don’t pay any tax, so was he just joining the gang, doing something almost half the adult population are doing?
Well, it turns out the reason that so many adults don’t pay tax is that they don’t earn enough to take them over the £12,750 tax threshold. This should cause a national outcry; instead the Tory government celebrate how many extra people they have taken out of tax every year. Surely it would make more sense to increase incomes so that people are better off, but start paying tax. Even a small amount would make a big difference to “The financial situation we find ourselves in” as government ministers keep telling us. Or maybe I’m missing something?
As my wife has always said, it is a privilege to pay tax. The alternative is run-down public services that no longer cope with demand, or an income that means subsistence rather than fulfilment. Indeed, in America in the 50s the top rate of tax was 90 per cent. This was seen as a way for wealthy individuals to contribute to building America. Anecdotally, higher-rate taxpayers were stopped in the street as people shook their hands to thank them for “building America”.
Even under Thatcher, corporation tax stood at 52 per cent, a level she saw as necessary to increase public sector pay to acceptable levels. So why do wealthy people think it is a sign of weakness to pay the tax they owe? It’s a question I don’t have the answer to in this column, but you’ll have your own opinions and I think the truth will be in among them.
What is clear is wealth is more unfairly distributed now than at any time in recent history. In the ’80s a managing director would earn about nine times the lowest-paid employee; now a CEO earns over 120 times the lowest-paid worker. That is not a sustainable place for us to be. The idea that hard work pays is becoming less and less true.
Look at the people we clapped, for working themselves inside out during the pandemic. Now we’re telling them it’s their own fault they can’t pay their (exorbitant) rent or buy food as it’s going up by 20 per cent due to inflation, whilst wages fall in real terms. None of them has the option to avoid tax; it’s taken at source via PAYE by their employer, so a third of any pay rise received goes straight back to the exchequer. Something that’s not true of the £3.7m Zahawi owed.
So when the council sets its budget (balanced by law), next month, with inevitable rises in council tax and charges and reductions in services due to real terms massive reductions in government funding, be grateful for everyone on PAYE. Ask what extra good could be done if paying tax was seen as a privilege by everyone else. Who’d have thought in this day and age, the best way to avoid tax, is to avoid earning altogether – or be a Tory politician!
