Friday, April 6, 2012

Ken's Tax Affairs

After some really unpleasant campaigning in the London mayoral elections, the main contenders have published details of their tax affairs. Boris's tax affairs are pretty straight forward - he earned a relatively large amount of money, all of his income was subject to income tax, resulting in what is an outrageously high marginal tax rate.

Ken Livingstone's declarations on the other hand show that his tax affairs appear to be a model of tax avoidance. In summary, he earns his income through a limited company (Silveta ltd - which appears to be mostly 'Ken Livingstone the company'), and then 'Ken Livingston the person' earns a small salary and dividends from the company. By doing this, he can reduce his effective tax rates, reduce his national insurance bill, manage the timing of when he pays tax to reduce tax, and can split his income with his partner to further avoid tax. His presentation of this arrangement however is extremely slippery. He claims the figures have been checked by an accountant, but if Ken had asked me for advice on what to publish to support income and effective tax rate, I would advise the following. :

You could publish details of just the personal tax return, which would indicate the tax paid on employment income and dividends on the company.

I would however point out that this misrepresents both Ken's total income and effective tax rate, if, as seems likely from the company's bank account, Ken had retained income within the company, thus a personal tax return only underdeclares income and overstates marginal tax rates when looking at a consolidated view of Ken's income.

So the most transparent approach would be to publish both Ken's personal income tax return, and details of all the income earned by Ken through his company in each period.

But what it looks like Ken has actually done is to publish details of his personal income tax return, then done an add back of a notional amount for the part of the corporation tax relating to the dividends actually paid in the period, in order to make it look like Ken has paid a higher effective tax rate. This is of course completely misleading, as it combines Kens personal income/tax with only part of Ken's income from the company to make the marginal tax rate paid appear higher. Even if an accountant had individually approved the personal tax return and the company tax return, no competent accountant would put their signature to this presentation as it is completely misleading.

Then you have to remember that Ken is the candidate who drones on about what he would like to do to rich tax avoiders, and has falsely accused Boris of not paying income tax on his income, and you have to wonder who in their right mind would vote for such a nasty, cynical, dishonest hypocrite as Ken Livingstone.

But the voters of Bradford West have proved that cynical hypocrisy is no barrier to election for left wingers who are prepared to say and do anything to get elected, but you really would have to hope that when faced with the facts about what Boris says on tax and does on tax, compared to what Ken says on tax and the convoluted arrangements he uses to avoid tax, this is an election that only has one possible result.

No comments:

Post a Comment