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Will Osborne close the ‘Livingstone Loophole’?

20 March 2012

10:33 AM

20 March 2012

10:33 AM

When I spoke to the tax justice campaigner Richard Murphy about Ken
Livingstone’s tax avoidance, he said that the practice of individuals pretending
that they were companies caused ‘a massive leakage of tax revenue. They have all the tax advantages of a company without the obligation to tell the world what they are doing with the
privilege society has granted them.’

You need to think about the secrecy as much as the self-enrichment when considering the behaviour of Livingstone and his kind. For a Chancellor facing a massive national debt the advantages of
cracking down on individuals who turn themselves into KenCos are obvious. The Livingstones of the world only pay corporation tax on their earnings rather than the full higher rate of income tax.
Even when they take out their money in dividends, their tax bills are still lower than the bills of the dumb saps who pay tax straight. The man, in Livingstone’s case, can use his wife’s tax
allowances to boost untaxed income, divert funds into a pension and claim tax relief, and set expenses against profits. The opportunities for creative accounting are many and lucrative.


But so are the opportunities for secrecy. Murphy’s complaint was that men like Livingstone enjoy the tax advantage of limited companies without the obligation to disclose their affairs.
Reform would not only raise revenue but also improve transparency.

A cynical Conservative Chancellor might also see reform as an excuse to damn the jaw-dropping hypocrisy of an opponent in the run-up to an election. He might say that Livingstone wants the little
people to pay for public services, while avoiding paying for them himself. The chancellor might quote Livingstone’s remark that ‘Cameron’s problem is too many of his team have become
super-rich by exploiting every tax fiddle’, while forgetting to add that he was no stranger to exploitation himself. The Chancellor might then note that Livingstone had gone on to say that
‘no one should be allowed to vote in a British election, let alone sit in our parliament, unless they are paying their full share of tax’, while forgetting to add that if his wish came
true he would be stripped of the franchise and barred from Westminster.

But I am sure that such thoughts have never occurred to a politician as other-worldly — nay, saintly — as George Osborne.


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