Tax avoidance isn't always unclear

The fringes of what constitutes tax avoidance may be hazy, but that doesn't mean that some cases are

One common response to the anti-tax-avoidance work of campaigners like Richard Murphy is that tax avoidance is a nebulous thing to try and identify.

This is true. No one deliberately tries to pay the most tax possible, and tax exemptions of the sort that people and companies are regularly pilloried for using exist because at some point, a government decided that certain types of behaviour was worth encouraging through the tax system.

Even using tricky-to-apply definitions like "acting against the spirit of the law" doesn't quite work. The spirit of the law that exempts books from VAT is to encourage a learned populace, since a well-read public is considered to be a good thing. Is it really tax avoidance that The Da Vinci Code is exempt under the same law?

Yet using those arguments to discount tax avoidance entirely doesn't hold up. There are times when behaviour is clearly designed to avoid paying tax, in a way that provides no conceivable social benefit and in fact imposes a significant burden on the avoider (just not as significant as the tax burden). This week's New Yorker has a piece which opens with one such example.

James B. Stewart writes (£):

Since New York City tax laws don't apply to people who are deemed to be nonresidents, even if they own a residence in the city and work there, Robertson was allowed to spend no more than half a year – a hundred and eighty-three days – in New York City. This exile was self-imposed. If he had paid New York City tax, which in the top bracket reaches a rate of 3.6 per cent of taxable income, he could have spent as much time in the city as he wished...

Friday nights were particularly risky, since Robertson or his wife often had social events scheduled in the city. In order to "earn a tax day," as he put it, he usually left town on Friday before midnight, even if his wife stayed at the apartment. Robertson's driver had to be on alert: as long as they crossed the Queens border en route to Locust Valley by midnight, Robertson didn't have to "waste" a Saturday as a New York day. Even one minute of a day spent in the city counts as a day of residence. (Exceptions are made for people who are in transit from one destination outside the city to another – from Newark airport to Long Island, for example, or to LaGuardia for a flight.) Robertson said he never missed the midnight deadline, although when he couldn't get his driver or a limousine service in time he occasionally had to hail a cab. On one occasion, Robertson came back from a trip and found himself crossing into Manhattan at 11:45 P.M. That mistake cost him a full New York City day, which he could have avoided by whiling away fifteen minutes at the airport.

The full article is fascinating, albeit heavily paywalled, and it reveals the amount Robertson gained from this practice: $26,702,341, out of a taxable income of $732m. The gut response is that there is something wrong in this state of affairs, which encourages a man to expend huge amounts of energy on perfectly unproductive activity, to the net detriment of both himself and the state.

And yet there is no easy response. The best one may even be the one which is even more unpleasant to consider: the state should cut him a deal. Offer him the ability to stay in the city for some amount between $0 (the amount they get now) and $26m (the amount which is clearly high enough to motivate his behaviour). This would be the definition of "one rule for us, another for them", but at least it would result in "them" paying something.


New York New York, it's a hell of a town (to avoid tax in). Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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The Liberal Democrats are back - and the Tories should be worried

A Liberal revival could do Theresa May real damage in the south.

There's life in the Liberal Democrats yet. The Conservative majority in Witney has been slashed, with lawyer and nominative determinism case study Robert Courts elected, but with a much reduced majority.

It's down in both absolute terms, from 25,155 to 5,702, but it's never wise to worry too much about raw numbers in by-elections. The percentages tell us a lot more, and there's considerable cause for alarm in the Tory camp as far as they are concerned: the Conservative vote down from 60 per cent to 45 per cent.

(On a side note, I wouldn’t read much of anything into the fact that Labour slipped to third. It has never been a happy hunting ground for them and their vote was squeezed less by the Liberal Democrats than you’d perhaps expect.)

And what about those Liberal Democrats, eh? They've surged from fourth place to second, a 23.5 per cent increase in their vote, a 19.3 swing from Conservative to Liberal, the biggest towards that party in two decades.

One thing is clear: the "Liberal Democrat fightback" is not just a hashtag. The party has been doing particularly well in affluent Conservative areas that voted to stay in the European Union. (It's worth noting that one seat that very much fits that profile is Theresa May's own stomping ground of Maidenhead.)

It means that if, as looks likely, Zac Goldsmith triggers a by-election over Heathrow, the Liberal Democrats will consider themselves favourites if they can find a top-tier candidate with decent local connections. They also start with their by-election machine having done very well indeed out of what you might call its “open beta” in Witney. The county council elections next year, too, should be low hanging fruit for 

As Sam Coates reports in the Times this morning, there are growing calls from MPs and ministers that May should go to the country while the going's good, calls that will only be intensified by the going-over that the PM got in Brussels last night. And now, for marginal Conservatives in the south-west especially, it's just just the pressure points of the Brexit talks that should worry them - it's that with every day between now and the next election, the Liberal Democrats may have another day to get their feet back under the table.

This originally appeared in Morning Call, my daily guide to what's going on in politics and the papers. It's free, and you can subscribe here. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.