Two Tax headlines, one question for the Government

“Cameron set to be first UK premier to publish annual tax statement” – Financial Times

A government adviser is quoted as saying: “By the time of the next election, I expect all cabinet ministers will have published their tax accounts – I don’t see how it could be otherwise at this point.” I can see how it would be otherwise. No-one really cares about the tax affairs of our leaders - as long as they are legally compliant and UK based.  The issue in the London Mayoral election is Ken Livingstone’s credibility, not the tax affairs of the candidates. The tax issue is a vehicle for exposing his hypocrisy. Occupy may be very clever at getting tax issues into the news but Vodaphone, Topshop and Amazon seem to still be doing well. Ultimately customers – like voters – care most about the quality of the product.

As both party leaders seem to have convinced themselves that publishing annual tax statements is important for their credibility it probably will happen. This will be a self-fulfilling prophecy, not an inevitable outcome. Unfortunately – as Matthew Barrett points out – releasing tax records is unlikely to help improve the regard with which politicians are held. A tax statement is pretty meaningless unless it is accompanied with information around how tax affairs are managed. Publishing returns will raise more questions than it answers and give journalists further impetus to run tax avoidance stories.

The transparency agenda is an important one but there are many more significant issues – party funding, access, tendering for government contracts, releasing data, opening up consultation processes earlier  - than releasing tax returns.

“Charities’ anger over Osborne’s ‘tax dodge’ attack on donors” – Daily Telegraph

The Big Society agenda is based on the idea that people should come together as they see fit, rather than being dictated to by the structures of the state. Philanthropy is a key pillar in making this vision work. Government ministers have often talked about getting wealthy people to give more money towards good causes. One of the reasons that the American systems is stronger in this regard is because taxation is lower and the state does less. The message sent out in this budget is that the state is better at spending this money than responsible individuals. To quote Chris White MP:

“Like many, I agree completely with the aim to reduce the amount that the wealthiest can claim through unlimited tax reliefs, but the decision to include charitable donations could result in the loss of hundreds of millions of pounds for the sector and send out the wrong message on large donations – undoing a lot of the good work that has been done by the Government so far.”

This policy came from the Treasury, which is obsessed with raising revenue to tackle the debt and is most comfortable when using the instrument of taxation. As Benedict Brogan points out, until the Government tackles the size of the state this type of issue will become more common as No11 focuses on more inventive ways to raise tax generated income. What is surprising is that no-one spotted the political danger in discouraging philanthropy.

The question

How do these two tax actions help achieve the Government’s overall strategy?

Related posts:

1. Is the government doing enough?