Do you know absolutely nothing about tax? Don’t worry, most ‘experts’ are the same, says Dabbler editor Brit…
Is The Budget over yet? Specifically, the entirely misleading press coverage of George Osborne’s announcements last Wednesday? Now I know a bit about tax, and by that I mean ‘a bit’ and no more. I certainly don’t claim to be an authority on UK tax law, which is so unfathomably complex that the Coalition felt the need to establish a whole Office dedicated to its Simplification. But having written professionally (and anonymously) about the last fourteen Budgets I have acquired, largely by accident, a grasp of the most basic basics – just enough, in fact, to be annually alarmed by the dreadful, ignorant, conflating, confused treatment of taxation in the mainstream media, and by the number of commentators who do claim the authority to pronounce loftily on matters fiscal and budgetary despite lacking even my meagre understanding of them.
Consider Owen Jones, a genial, baby-faced Trotskyite, who appeared on This Week last Thursday with a little film in which he claimed, to my unfolding astonishment, that the cut in the top rate of income tax from 50% to 45% was like ‘‘writing a cheque for £40,000″ to 23 members of the Cabinet, enabling them to purchase, should they have sufficient thirst, 288 bottles of Cristal champagne.
Jones had come to this bizarre conclusion – delivered with absolute ‘more-in-sorrow-than-anger’ certainty – by confusing the idea that 23 members of the Cabinet are ‘millionaires’, ie. worth over £1m pounds, with the idea that each must have an income of one million pounds every year.
Thankfully, Andrew Neil in the studio did point out the gaffe (and to his credit, Jones did later own up, via Twitter, to an ‘embarrassing cock-up’) but I’d like to know why the BBC’s producers allowed him to make it, complete with a limo and champagne flutes as televisual props? It was humiliating for Jones and also misleading for any viewers who might have turned off before Neil corrected it. So either the Beeb knew Jones was talking twaddle and allowed him to do so anyway for the purposes of starting a row in the studio, or, more likely I suspect, the producers of one of the BBC’s major in-depth politics programmes don’t have a sufficiently solid grasp of the fundamental principles of taxation that a screaming error like this does in fact scream at them.
Owen Jones has a simple political view: he thinks it’s immoral that some people are richer than others. It’s not a view I share but it is a recognisable stance. The problem is that Jones feels competent to make public comment on the details of the Budget in the light of this view.
There’s a lot of this sort of presumptuousness about at the moment, in no small part driven by the UK Uncut movement, which tries to aim the radical protest politics of the Occupy ethos at the tax arrangements of big businesses and wealthy individuals. Occasionally this is fully justified, but most of the stories I read are absurd oversimplifications.
Take this story on DigitalSpy entitled ‘One Direction become company directors to avoid tax’, in which it is insinuated that because the members of the boy band will receive their earnings through a company rather than being paid directly, they can dodge huge amounts of tax:
Private companies in the UK pay around 28% tax on profits, compared to 50% income tax for individuals earning over £150,000 a year. Expenses such as travel, clothing and make-up also become tax-deductible.
One Direction could save up to £220,000 for every £1m they earn.
Now were I the financial adviser to One Direction they’d be in big trouble, but that aside, I would certainly advise them to use a company because it is a much more sensible way for them to structure their earnings than trying to operate as individuals (they will presumably have multiple income streams – from record sales, shows, merchandise, DVDs etc – in numerous different countries, with jointly-incurred expenses required to generate this income, and will probably equally share the net results of all that. Trying to do that as individuals would be a nightmare comparable to divvying up the restaurant bill with a faculty of students). But the claim that they can make a tax saving of £220,000 per £1m income is ludicrous, first because they would only pay 50% income tax on earnings over the £150,000 top rate threshold; but more importantly second, because it assumes they won’t actually extract any income from the company for their own use. In fact, as soon as they attempt to do that so that they can spend their moolah on skateboards, Top Trumps cards, hair products and so on, they would have to pay tax on dividend income, the rates of which are not much less eye-watering than income tax ones.
I appreciate you shouldn’t expect DigitalSpy to apply much in the way of standards to its ‘reporting’, but my conclusion following the Budget coverage is that the rest of the mainstream media doesn’t worry too much about facts either. The ‘granny tax’ debacle is a perfect illustration of how a snappy label can frame the debate. Probably some wiseguy on Twitter coined ‘granny tax’ to describe a freeze in a proposed future allowance increase, and suddenly the Budget narrative on the BBC, Channel 4 and virtually all the newspapers is: “Osborne funds tax cut for millionaires by hitting pensioners” – a ridiculous way to summarise a Budget the net changes of which will make most pensioners slightly better off than if they hadn’t been made, but one nonetheless propagated even by Tory-leaning papers like The Telegraph and the Mail.
You can find informed commentary on tax legislation but you have to ignore the front pages and the TV news and read the comment section of the better broadsheets, the weeklies or the FT. But I suppose that’s just yet another complaint about headline-mongering hackery. Plus ça change says you drily and I wouldn’t disagree.