måndag 25 februari 2008

Great Tax Scams

Tax scams, legal and otherwise, have been in the news over the past few days. First there was the business over the wealthy Germans who have salted away their savings in Lichtenstein to avoid paying taxes. Accused of aiding and abetting tax fraud - it is not a crime in Lichtenstein - Crown Prince Alois has stood his ground, pointing out, quite rightly, that if Germany was a more direct democracy with a better tax system, perhaps its citizens would not cheat.

It now transpires that the German authorities had bought their information from a whistleblower who has also been paid for information by British investigators.

High tax Sweden has also lost out from wealthy individuals, such as Ingvar Kamprad, founder of IKEA, who feels that he cannot afford to live in his home country and have taken up residence abroad.

The Non-Dom tax debate
In the meantime, in Britain, a debate is raging over whether the so-called non-domiciled - wealthy foreigners - should continue to enjoy their tax privileges. The argument is that the country will be deprived of their talents if they have to pay the same taxes as the Brits themselves.

This is a good point, but doesn't it apply to the Brits themselves? And not just to the wealthy ones but those at the bottom of the pay scale, and, indeed, those who are not working at all? Even those earning no more than the national minimum wage get hit by the tax authorities, to the extent that for many, the reward for work is not worth the effort, and so the effort is not made, since it is more lucrative to stay away from work, draw a meagre benefit and top it up with work in the black economy, or a little petty crime.

VAT fraud too
It is not just taxes on wages that are causing problems for the authorities. VAT swindles are costing EU members tens of billions of Euros a year. The trick is to buy goods VAT-free from one member state, and to sell it on with VAT added in another, whilst failing to pass the tax on to the authorities. European finance ministers are to be asked next month to choose between rival proposals for reforms designed to clamp down on the fraud, but it seems there is little enthusiasm for the alternatives and it has been pointed out that these open up fresh opportunities for different frauds.

People are mobile, property is fixed
Politicians and their expert advisors obviously need to be reminded of a simple fact. People and goods are mobile, whereas land is fixed, which cannot be hidden or removed to a tax haven. The value of land can be readily determined and a tax on the value of land cannot be avoided or evaded. If politicians refuse to accept this obvious point, the only conclusions that can be drawn are that they do not want to hear it, or that they are too cowardly to tackle the small but powerful vested interests that gain from the present state of affairs, or that they are not serious about dealing with the problem.

In the meantime, economist and investigative journalist Fred Harrison (below) has written about how the present tax systems in democratic countries, whilst appearing to be based on "ability to pay", end up by soaking the poor and enriching the countries' landowners.

Ricardo's Law ~ House Prices and
the Great Tax Clawback Scam


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Cardinal Cormac Murphy O'Connor

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