Cameron tells Pakistanis tax non-payment is unfair

David Cameron criticises Pakistan’s tax-dodging rich at a press conference in Islamabad.

In a speech at a press conference in Islamabad, David Cameron told Pakistan's elite that:

Many of your richest people are getting away without paying much tax at all – and that's not fair.

When considering Cameron's words, let's remember that the UK facilitates the very same actions through its sovereignty over 13 of the 24 biggest tax havens in the world, including Jersey, Guernsey, the Cayman Islands and the City of London.

First, it is important to note that the vast majority of people considered "rich" in the UK do pay their taxes. According to Her Majesty's Revenue and Customs (HMRC), there are roughly 327,000 people who earn more than £150,000 per year – the rate at which the 50p tax is introduced. HMRC predicts that by the end of this fiscal year, the richest 327,000 will be paying 26.7 per cent of the total tax collected in the country.

Nevertheless, a request filed by the London Evening Standard under the Freedom of Information Act in 2007 revealed that in 2004-2005 only 65 of the roughly 400 UK-based individuals who earn £10m per year or more actually paid income tax. The failure was estimated to have lost HMRC up to £2bn in revenues.

The related issue of companies in the UK not paying tax has been brought to mainstream attention by the recent UK Uncut protests – fingering Vodafone, Topshop and Boots, among others, as having allegedly "dodged" paying billions.

The chairman of Pakistan's Federal Bureau of Revenue (FBR), Salman Siddiqui, recently issued notices to the wealthiest 700,000 of Pakistan's 2.3 million rich to give up withheld taxes. Although the number of non-payers is far higher than estimates in the UK, Cameron would be better advised to clean up the UK's own mess first before preaching to other countries.

Surprisingly, Cameron did not make the distinction between tax evasion and tax avoidance in his speech. Whereas the latter is considered legal – when taxes are not paid, using the help of loopholes – the former is considered illegal: non-payment of taxes that breaks the law.

A committee was set up to investigate the costs and benefits of having a General Anti-Avoidance Rule for the UK earlier this year. It has until 31 October 2011 to come to a conclusion.

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

Getty
Show Hide image

In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”