1. The Super-Rich Know How to Avoid Inheritance Tax
When Mr Blair goes to meet his Maker, it will be interesting to see whether the Blairs volunteer to sell their mansion to pay a £3 million tax bill, or whether indeed the property has been transferred into a tax-exempt trust.
It is often said that intelligent Socialists never let their politics get in the way of their children’s futures. The reality is that inheritance tax has long been a propaganda tool that the political class has used to promote the vote-earning politics of jealousy, whilst the most vocal – and no doubt well-meaning – advocates of wealth distribution, such as Tony Benn, when ultimately faced with the consequences of their political views on their own beloved families, find ways of avoiding it. It is John’s conviction that governments should do three things: incentivise people to do good and to achieve, deter them from doing wrong and working against the interests of society, and help those who are unable to help themselves. The principle behind inheritance tax is diametrically opposed to this principle as it disincentivises families from working as hard as possible to provide for the next generation, encourages them to squander hard earned wealth (if they are not already demotivated from generating it in the first place), or else – if they can afford expert tax lawyers of the likes that serve Tonys Benn and Blair – to siphon off their wealth to foreign incorporations where the Inland Revenue has no access. Since inheritance tax is avoided by the super-rich and targets only those who are hard working and responsible and looking to hand on their legacy of hard work to the next generation, John considers it morally egregious and is determined to fight it.
2. Why Big Multinational Businesses Never Really Pay Tax
Let’s imagine there’s a company called Nerdle that produces widgets that are sold to users in the US and the UK. Since they trade in more than one country there is no compelling reason why they should be incorporated in either of the two countries, so they decide to incorporate themselves somewhere in between the two, say in Dominica – which just happens to be a tax exempt jurisdiction.
Nerdle’s widgets are very profitable to the intellectual property owners that incorporated the company in Dominica, amassing billions of dollars annually in revenues. But Nerdle themselves are software engineers; they create the widgets but they don’t actually sell them. Instead they incorporate separate companies in both the US and UK, both of which are called Doodle. It costs $1 to produce a widget and yet each widget sells to the end user for $10. Nerdle ‘negotiates’ a contract with Doodle such that Nerdle will sell each widget to Doodle for $9.99. Each year Doodle sells a billion widgets between the US and UK and profit and tax figures render as follows:
- Doodle makes a profit of $0.01 on 1 billion sales = $10 million and pays $3 million in tax, split between the US and UK
- Nerdle makes a profit of $9.99 – $1 = $8.99 on 1 billion sales = $8.99 billion and pays around $3,000 annually renewing their tax free incorporation registration and obtaining a certificate of good standing to satisfy international anti-money laundering requirements, and filing their annual non-taxable accounts in Dominica.
The verdict is that $3 million tax is paid on $8.99 billion of profits, equivalent to some 0.03% ‘corporation tax’. That’s a pretty good deal for Nerdle, but remember that all the while, there are many British companies competing with Nerdle to sell British-made widgets, and these British companies need to pay 30% company tax on their widgets, and possibly also VAT, which means the British company has to charge at least 56% more for each widget if it hopes to ‘take home’ the same proceeds per widget.
The political class think the British public is either too stupid or too ignorant to understand this and so managed to perpetuate this system for many years… until UKIP came along.
→ UKIP: The Only Party that Knows How to Make Mega-Corporations Pay UK Tax
John has been trading internationally for ten years and long ago recognised the fact that foreign companies operating inside the UK get a great deal at the expense of British businesses and those of us who rely on tax-funded services and infrastructure. However, those not engaged in international business may not understand how easily – and legally – huge corporations manage to avoid paying tax – except for the voluntary token amounts that may sound large to the man in the street, but which typically represent only a tiny percentage of what they actually gain from their UK trade. So, let’s look at how they do this.
→ What UKIP proposes
- UKIP will increase personal allowance to the level of full-time minimum wage earnings (approx £13,500 by next election).
- Inheritance tax will be abolished.
- We will introduce a 35p income tax rate between £42,285 and £55,000, whereupon the 40p rate becomes payable.
- UKIP will set up a Treasury Commission to design a turnover tax to ensure big businesses pay a minimum floor rate of tax as a proportion of their UK turnover.