The neanderthal social views of the ukuncut protestors

Posted by Christie Malry on December 6, 2010 at 9:36 am

Another weekend brings more news of protests by the ukuncut crew about perceived tax avoidance. Clearly they've got bored of Vodafone, or perhaps they're finding their prices on iPhones too hard to quit 1, so they've moved on to Topshop as their new target.

The rap sheet for Topshop is fairly well rehearsed.  Topshop is the success story of Sir Philip Green.  In 2005, the Arcadia group, which owns Topshop, paid a dividend of £1.2bn to Sir Philip's wife, who is the owner of Arcadia. Only she isn't UK resident or domiciled (she lives in Monaco), so no income tax was payable by her on the receipt.

Critics, led by that dribbling rent-a-tard Richard Murphy, claim that by paying the dividend in this way Green saved £285 million. But let's unpack the assumptions that make such a claim possible.

For as far back as anyone can remember, the UK has had as a core principle of taxation that transfers between spouses are completely tax exempt.  A husband can transfer assets to his wife without triggering a capital gain. The only exceptions are where a UK resident spouse transfers assets to a non-UK domiciled spouse, where a lifetime limit applies.

The UK has also moved strongly against the principle that a husband and wife are to be treated in any way as a single unit for income tax purposes.

Mrs Green lives in Monaco, and is pretty obviously resident and domiciled there. Given that the UK has no ability to tax people who don't live there, what exactly does the charge of tax avoidance made by Murphy and others mean?  Note how Murphy says that (Sir Philip) Green has saved £285 million of tax.

So, perhaps the concern is:

  • it's somehow improper for one spouse to transfer assets (in this case Arcadia) to the other.
  • it's somehow improper for one spouse to do all the work but for the other to receive the benefit.

Are there other reasons?  I don't know.  Dividends, you will recall, are only payable out of retained profits, which accumulate from post-tax income.  That means the income used to pay to Mrs Green has already been taxed in the hands of the company once.  OK, so higher rate taxpayers must pay an additional amount when they receive dividends. But dividends are the main way that companies distribute benefits back to their owners.  Corporation tax is our mechanism to ensure that foreign owners of UK companies don't escape their tax obligations altogether.

So the tax protestors seem to be arguing that Mrs Green hasn't really earned her £1.2 billion but that Sir Philip has. And therefore that it ought to be taxed as part of his income instead.  As he is (according to Worstall) UK resident, this would mean additional amounts of tax to pay.  I find this incredibly insulting.  The divorce courts in the UK have long fought against the pernicious idea that women are useless accoutrements for their richer, more intelligent, more able husbands.  Woe betide the millionaire husband who tries to argue in a UK court that he brought all the money into his marriage.  Many have found that 'homemaking' is seen as the vital cog in a marriage that makes the husband's earnings possible, and the split of resources on divorce typically reflects this.  I know as much about Cristina Green as any tax protestor (i.e. nothing) but I am offended that it's assumed that she's thoroughly worthless.

Instead, is it the asset transfer between spouses that tax protestors wish to attack?  This exists for the very good reason that spouses are expected in law and reality to look after each other.  Exempting transfers removes an obstacle from them doing that.  Do we really want a tax regime that penalises a spouse from doing the right thing, even if it sometimes also benefits rich people?  For sure, we could introduce some sort of lifetime limit for UK domiciles too, but only at a cost of unwanted complexity.  And, the reasons above notwithstanding, we do think about married couples as a single unit in some social contexts, and continue to do so in the welfare benefits system.

We have always known that the left wing are a bit thick.  Yet it seems that they're desperate to grasp the mantle of 'nasty' from the Tories as well. They're well on the way.

Notes:

  1. Why does the @ukuncut account post via Twitter for iPhone anyway? Anyone who has an iPhone has more money than they need.

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