Happy New Year! Welcome back to the Denton Briefing in 2017. I hope you all had good break – I know I did – but now it’s back to the coalface. And what a start! Theresa May has finally delivered some clarity about the terms of Britain’s divorce from the EU. Brexit will mean a clean break from the common regulations, standards and free trade of the EU’s single market– with no ums and ahs. The road ahead promises to be perilous but there is now no doubt about the destination. And the sooner we all have certainty, the better.
Elsewhere we have some alarming figures about corporate fraud, an interesting debate about inheritance tax and some revealing disclosures about the inner workings of the EU’s Code of Conduct Committee on Business Taxation and former Luxembourg prime minister Jean-Claude Juncker. Whoops, we’ve strayed back onto the EU again.
As I write, President Trump has just moved into the White House so we could be in for an interesting ride. No doubt, I will be featuring “The Donald” in future Briefings but if you want to hear it straight from the horse’s mouth, so as to speak, you’ll need to get a Twitter account. And finally, there is a reminder about the deadline for filing tax returns and, if you are late, the excuses that you are better off NOT using.
Theresa May sets out Brexit strategy
Theresa May promised to take the UK out of the EU single market and pledged instead to seek a “bold and ambitious” trade agreement with the bloc, writes Henry Mance in the Financial Times. In a speech outlining her Brexit objectives, the prime minister said she wanted “a customs agreement with the EU” while rejecting the common external tariff that prevents Britain from negotiating separate trade deals with third countries. The speech – Mrs May’s most detailed statement on Britain’s objectives before formal negotiations begin – mixed firm declarations of intent with a conciliatory tone. “We are leaving the EU, but we are not leaving Europe,” the prime minister told an audience at London’s Lancaster House. She promised to seek an agreement with the EU that meant “the freest possible trade” while allowing the UK “control of the number of people who come to Britain from Europe”.
Mrs May later also the UK would be prepared to leave the EU without an exit agreement. “No deal for Britain is better than a bad deal for Britain,” she said. The government could then strike trade deals with other countries and use “competitive tax rates”. Yet she added that British voters had chosen Brexit “with their eyes open”, reiterating her stance that the result of June’s referendum is irreversible. “It was the moment we chose to build a truly global Britain,” she said.
Netherlands “will block UK-EU deal without tax avoidance measures”
The deputy prime minister of the Netherlands, Lodewijk Asscher, has written to socialist leaders across the Europe calling on them to block any EU trade deal with the UK unless it signs up to tough tax avoidance regulations, writes Daniel Boffey in The Guardian. Asscher, who was recently elected leader of the Dutch Labour party, said it was in the interests of both the UK and the remaining 27 EU member states that May’s government is prevented from creating “a low-tax neoliberal outpost”.
UK shoots up corporate fraud and cybercrime rankings
Rising fraud incidents have catapulted Britain towards the summit of global corporate fraud rankings, writes Oliver Gill in City A.M. Over the last 12 months the proportion of British businesses saying they had been affected by fraud jumped from 74% to 90%. Only Colombia, with an incidence rate of 95%, was ahead of the UK in the global rankings compiled by risk consultants Kroll. The UK (92%) and Colombia (95%) also occupied second and first places respectively in relation to cybercrime. The survey found high staff turnover was the key driver for Britain’s businesses being affected by fraud. This compares with the US, where 80% of businesses said they had been impacted, with the driver behind fraud being the complexity of IT infrastructure.
We inherit too much and earn too little
It is not hard to avoid inheritance tax if you have serious money, writes Paul Johnson, the director of the Institute of Fiscal Studies, in The Times. So it’s really time to look again at this tax and try to close some of the most obvious loopholes. Not least the simple expedient of passing it on at least seven years before you die — not an option for those whose wealth is tied up in a home and a pension. There is also the complete absence of inheritance tax on agricultural land and on certain business assets. And that’s before you get into trusts and other such vehicles. He notes that those in the top 20% of lifetime income are ten times as likely to have received an inheritance of more than £250,000 as those in the bottom half of lifetime incomes.
One possible change would be to move to a system of taxing receipts of gifts and inheritances, but this is very hard. We should do what we can to make the tax system fairer and more effective but the real challenge must be to make inheritance matter less. That means action in the housing market — building more houses, cutting stamp duty, increasing council tax on more expensive properties. It means doing still more to promote social mobility through education and skills policy. And it means tilting policy away from supporting the relatively wealthy old towards the less wealthy young.
Jean-Claude Juncker – the Eurosceptic gift that just keeps on giving
Time is now surely running out for European Commission president Jean-Claude Juncker following the latest evidence of his rank hypocrisy — not to mention his pivotal role in a monumental tax dodge, writes Robert Hardman for the Daily Mail. The latest scandal follows the leak of classified documents involving the secretive EU Code of Conduct Group (Business Taxation) set up in 1998 – when Juncker was both prime minister and finance minister in Luxembourg – to combat harmful tax competition. This committee has made repeated attempts to toughen regulation but has been blocked by Luxembourg thanks to a rule requiring unanimity on all the committee’s decisions. Exasperated by this stalemate, a number of countries including Germany and Sweden then argued in favour of a majority vote. ‘Nein,’ said Luxembourg and vetoed that, too. So a country with 0.1% of the EU population (think Northamptonshire with fewer people), has been frustrating serious reform of offshore tax avoidance for years. Then, when it was proposed that the committee’s deliberations might be made public, that also received a big fat thumbs down from Juncker and his compatriots.
Yacht fire among late tax return excuses
It’s one of those tasks that is eminently easy to put off but with the deadline for filing tax returns fast approaching at midnight on 31 January, almost six million of the 11 million or so people in Britain required to fill in a tax return still haven’t sent it in yet, writes Rupert Jones in The Guardian. Around 870,000 taxpayers missed the 2016 deadline and paid the £100 fine, plus extra penalties in some cases, and HMRC gave examples of some of the more unusual – and unsuccessful – excuses. These included: “My tax return was on my yacht, which caught fire”; “A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed”; and “My wife helps me with my tax return, but she had a headache for 10 days.”