Monday 8 November 2010


The country is broke because of a collapse in our national income, which was caused by the collapse of the banking sector.

Although the income of the government collapsed and they had to lend the banks unimaginable amounts of money, the government carried on spending money elsewhere pretty much as it had planned. Of course unemployment has risen and that has meant a bigger bill in JSA and Housing Benefits and the bill for interest of government debt has gone up.

We are not taking in enough money in tax to pay for our outgoings including interest on our loans. There is a tax gap.

What is the tax gap? Well, it has three parts. The first part comprises tax avoidance, which has been estimated at around £25bn a year. Tax avoidance is the exploitation of loopholes in UK tax law and the careful use of tax havens which we have talked about before on Munguin’s Republic. There is absolutely nothing at all that is illegal about using tax havens. They are inefficiencies in the tax law of the country which have been allowed to continue by successive governments who wish to stay friendly with rich people, and in some cases which actually consist of rich people. Several Cabinet Ministers in the present government are reputed to have large amounts of money in the tax haven of the British Virgin Islands (pic rt), including George Osborne (below with David Cameron), none other than the Finance Minister, the International Aid Minister and the English Transport Minister.

The second part is tax evasion. That is the one that is a criminal offence. This has been estimated to be in the region of £70bn a year. That's a lot of money.

HM Revenue & Customs claims it is much less, but they use what many would describe as dubious methods for estimating unpaid tax.

The third part is unpaid and late-paid tax which, for this year may be in the order of £26bn.

If the government is even half way serious about collecting any of this tax, they are going about it in a weird way. Labour has cut and cut and cut again the number of staff in HMRC. 26,000 jobs have gone since 2005 including 5000 last year. This government intends to carry on sacking. This is utter madness. It is estimated that each front line member of staff can bring in as much as 30 times what it costs to pay them, so why, of all the departments to lose staff in, would they choose this one? The result is that tax that is so badly needed to keep services going is being given away.

The coalition keep banging a drum about benefit fraud, which is estimated at somewhere over £1 bn a year. A frightening amount without any doubt. Much more too, is lost because of inefficiencies in the system and staff or systems which make too many mistakes in their calculations.

But still week in week out we hear about ways to reduce this, and the iniquities of benefit thieves. This of course goes down very well with the Daily Mail and the Sun, which big the figures up and fail to point out when the government put the above two together and describe it all as fraud. Nothing like bashing the layabouts!!

The Tory manifesto did not include anything about tax fraud, but as the Liberals’ did, the coalition is promising to “make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals and a review of the taxation of non-domiciled individuals.

In other words ... nothing.

I agree with the efforts being made to ensure that we do not lose more than £1 bn a year in benefit fraud, I’d just be very happy to see the same level of effort going into fraud at a higher level.

Maybe if that happened, we could hope to live for the next 10 years in a little less discomfort than we appear to have coming to us.

Figures estimated by Richard Murphy, director of Tax Research LLP


  1. Excellent post!

    Hacking away at the bottom of the social ladder for less than a 1% of what is being sucked out of the economy by the very few at the top of the ladder.

    You'd think it would be on the news and all over the papers, you'd think the that professional journalists would be questioning politicians and presenting stories about it, informing society and challenging vested interest!

    You'd think other political parties would be taking aim at such an easy target, makes you think doesn't it?

    Our masochistic subservience as a society really is appalling - we're like medieval flagellants! It's not enough to be kept in line, but being complicit in the act through self-sacrifice and self-harm is just surreal!

    Well done for posting on the topic, the more bloggers and commentators who air this the more people will recover their sense of outrage - and hopefully that emotion will turn to demands for action.

  2. Morning Tris. I know you've spoken about 'tax havens' before but it does have another name and that's off-shore banking. Let's not forget there are thousands of law-abiding British citizens who are forced into off-shore banking because they don't currently have a property in the UK as they work outwith the country. They pay all relevant tax on their savings, so off-shore isn't a haven for them but, because they wish to save in sterling, it's their only option.

  3. Subbie - yeah, let's not talk about the problem. Some putative set of poor wee expats who are living abroad and working abroad can't save with a UK bank, so let's ignore the fact we're losing over 100bn in tax while we talk about sorting out benefit scroungers!

    If there are honest law-abiding people on the bottom in the UK having to accept that they might just be collateral damage in the ConDem's plan for austerity, then some people who are living and working abroad ought to be able to accept that perhaps 'saving in sterling' is a luxury they'll have to give up, so that we can stop haemorrhaging orders of magnitude more money out of the top of the UK economy!
    We're all in it together.

  4. Subrosa means well but wrong. If people work outwith the UK and they are out for a full tax year would be considered to non-resident and only income arising in the UK would be subject to UK tax. If they were born here they would still have the full personal allowance available and that could go against the savings income.

    The sentiments in this article are correct. The Revenue and Customs over the past few years have been driven by number targets to reduce staff first rather than consider the amount of maoney that could be raised by the retention of experienced staff. The closure of the small local office network recently has seen a considerable number of expierenced staff who due to family reason or geography could not move to the call centre factories that have sprung up. Many local expierenced compliance staff who had good local knowledge were let go or moved into just answering phones.

    Tax evasion, tax avoidance and lately tax fraud on the self-assessment system is costing the country billions and it was time that Vince Cable started to practice what he preached up to polling day.

  5. Given the way HMG wastes so much of the money it collects, I am beginning to think of tax avoidance as a plain moral duty - but, not being all that bright and not having powerful friends to enable me to become non-dom for tax purposes, there's not much I can do about it.

    BELIEVE IT OR NOT, HMRC actually SOLD many of its offices and LEASED THEM BACK from a company in a TAX HAVEN. SO they are obviously really quite relaxed about these things - for the right sort of people.

  6. Tris/Munguin

    Sorry to go off topic but I thought that you may be interested in this article. Its a fascinating insight into what Gordon Brown thought of his nationality.

  7. Thanks Dundee.

    I agree with you. I can't see why people aren't rising up and saying....Look, if you thieving ******** paid your bloody taxes my granny wouldn't have to go without care, or my kid wouldn't have to forego his swimming lessons, or my library could stay open.

    We're not asking much from the rich... just do what the rest of us do and pay your damned taxes.

    But no, somehow we bend at the knee and tug our forelocks and do accept that these people are just better than us...


    Unfortunately it needs the Daily Mail or the Sun to take up the cudgels before the government takes any notice.... and I don't see that happening any tme soon.

    The Daily Munguin doesn't impress them.

  8. Well SR. I’m not talking about little people who use a bank account abroad because they live abroad. I’ve done that. It’s easier than trying to run a bank account in Scotland from another country.

    It’s the fat cats...the big rich people who take their money out of the country in order to avoid paying tax, people who register their businesses in places like Monaco or the Caymans so that they can keep every halfpenny and not pay for the services they receive here, despite being filthy rich.

    It’s even worse when some of them are Cabinet Ministers telling us all to tighten our belts.

  9. Tris

    nodded hello to a couple of lads i know doing some roofing work just up the road.

    wife tell me they are both claiming working tax credit and they are self employed being paid in cash and submitting low earnings in their claims.

    see in ain't just the unemployed who fiddle is it eh?

    "Some long-term unemployed do work — in the black economy. A minority of them get caught and punished, but most are shrewd, resourceful individuals skilled at working the system. Workfare will merely be another clumsy government obstacle to skate around."

    Read more:

  10. We're all in it together Dundee, is a phrase that is coming back to bite these people on the bottom.

    I'm maybe misunderstanding what SR was saying.

    I certainly ignored the saving in sterling part of it.

    I really don't know that answer to that.

    I think that lots of people who want to save in sterling do have thier money paid into the Scottish bank accounts. I know my pal who worked in Saudi had his salary paid in sterling but could withdraw Rials from cash machines out there.

    But in any case, these people are small fry with their £100 a month savings over a few years.

    What I care about is people who invest millions in these places.

  11. Anon: Thanks. I've heard that the Revenue is in a dreadful mess. We all know about the millions who have the wrong tax codes. A couple of years ago I had to get some change made in my tax code. It wasn't huge but it was costing me around £60 a month. I don't know how many phone calls I had to make to them with no result, each time being promised that action would be taken. Even now it is still wrong, but only by a tiny amount and frankly the cost of the phone calls and the frustration is not worth the effort. They can keep the money.

    There is an assumption that people can up and go to another part of the country, but it is not always so. Children at school, elderly parents who need looking after, partners’ work, and all manner of other things (not least expense) go against that being an option for many people.

    Look out for another vast reduction in staff over the next few years.

    Because of the mess, it will be older, more experienced, more confident staff that will take redundancy and retire early. Heaven only knows the complete mess that the Revenue will descent to.

    It is said that the morale in HMRC is the lowest in the Civil Service.

  12. Ha ha ha ha ha... Mr Spalton... you're kidding, right?

    Why are we so incredibly poorly governed?

    Ah yes, Gordon Brown.

    Like you, I don't know any people who are high enough up the social scale that I can become a non-dom... so that's me stuck paying my tax...

  13. Och Dubbieside, you know you can go off topic any time you want to on here...

    Thanks for posting that article. It's another thing that it's worth letting people know about. Ashamed to be Scottish... gagging to be seen to be interested in ENGLISH football and, of course, it's most successful player... hoping some of the gold dust would wear off on him...

    I will never forget him for, when asked about his nationality in the USA, saying that he was North British.

    Fancy being ashamed of being Scottish.... sheesh...

  14. Niko. I know, you're right. In truth probably most of us have tax dodged in some way at some time.

    Ever got a wee man round to do some job for you, and he says... "that'll be a tenner..." and you know perfectly well that there's no tax being paid on it?

    Or you dig your old auntie's garden for her and she hands you £25 as a thank you... and you don't declare it. But you should because it was income, on which you should have paid tax.

    It works its way up from there... and yeah, cheating on the child credit and the working family tax credit and all that stuff... for sure that goes on.

    And when they are tightening up (or trying to) it will be these people they target, rather than the fat cats who stash away millions on Jersey or BVI.

  15. Good article Niko. I tend to agree with the main thrust. I've been involved on these mandatory things before and I've found they don't work.

    For a start the really hard cases simply don't do them. When their advisor tells them about it, they make it very clear that they don't want to do it, and somehow the paperwork gets lost.

    People can be forced to do stuff but, not with a good grace. And how can you tell if a person is being deliberately rude and obstructive, or if they are, like so many LTU, depressed.

    Councils won’t get involved as a rule because of problems with their unions. Unions know that if the council has a steady supply of people coming on work experience, they will reduce the workforce.

    Charities are unwilling because it means Criminal Records checks (who pays), and many will fail them.

    They are hopelessly badly organised because you can’t get the staff to work on them. The turnover of employees on the one I worked on was shocking. We had staff that lasted less than a week, some only a day. One left at lunchtime on their first day.

    And what is the point when there is no work for them anyway!

  16. Tris

    That's the thing 'work' all this posturing by Cameron wont make one single job it didnt under Thatcher...........

  17. Yes Niko. That's the starting point. Once there are jobs you can start getting the people who want them into them. Then you look at what you are left with and work out what to do with them.

    One of the things I've discovered is that most people who are unemployed have a very good reason for so being.

    While there are so many people unemployed we should be making sure that those who are underqualified for the kind of jobs that are available get some sort of help to get the right skills, be they technical or social or academic...

    Reading and writing would be good for a lot of them... It would help. Presentational skills wouldn't hurt.

    I remember saying to this lad in my "jobshop" that there was "X" job in the paper... and that they were looking initially for a phone call. I asked him if he was Ok ... he knew what to say... he had his cv with him so that he could refer to it...

    He said that yeah, everything was cool....

    So he phoned and started the converstaion with "Ehhh, Ken what it is..."

    Clearly the guy did not "ken" what it was...

    The trouble with so much of that kind of training that the jobcentre provides is that it is of such poor quality.

    People get all the wrong information. Because of course it is all done on the cheap.

    But they are reducing the places in college... the stupidest time in the world to do that!

  18. CH: I've made that into a post . I think it should be read by as many people as possible. And this is from the Daily Torygraph!!