Now isn’t this interesting? Julian Richer is selling Richer Sounds, his audio retailing company. Which is great, obviously, we always like to see those who have done well cashing in. But the thing is he’s structured the sale in a manner that means he doesn’t have to pay any capital gains tax. Yes, that’s right, one of the dynastic fortunes of our time will be monetised without the Treasury getting even a sniff at it.
It should be pointed out that this is all entirely legal. But that never stops the tax campaigners does it? Amazon pays absolutely every bean that the law states it should pay and yet they’re abused as tax dodging bastards. Apple’s the biggest single taxpayer ever in the United States and yet they’re actually prosecuted by the European Union over the matter.
It gets even better. Julian Richer actually funds an outfit snarling at the multinationals for not paying tax.
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] A wealthy former Tory party donor is to fund a new independent tax watchdog that will pore over the opaque finances of multinational companies and individuals to expose tax avoidance. Julian Richer, who founded the hi-fi and TV specialist Richer Sounds, is bankrolling the non-profit venture Taxwatch after growing angry at the UK’s increasingly “broken” tax system. “I’m outraged by the status quo,” said Richer. “We pay our taxes but these people are just laughing at us. You can’t move these days for stories about people and companies trying to find ever more ingenious ways to avoid paying their tax bill, whether it’s tech giants, celebrities or major landowners.” [/perfectpullquote]Julian Richer will pay no capital gains tax on the sale of Richer Sounds. Even though he’s cashing in with an initial near £10 million receipt:
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The company will pay Richer an initial £9.2m for the stake[/perfectpullquote]No CGT – nor, obviously, income tax – will be due on that sum. No nurses will be employed as the NHS has more money by his gaining those millions. And that’s the initial payment. The total is going to be rather larger:
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]If Richer Sounds continues to be successful Richer will receive additional payments over a 15 year period[/perfectpullquote]And as I say, no tax will be forthcoming. Because:
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The founder of Richer Sounds is handing control of the hi-fi and TV retail chain to staff, in a move that will also give employees large cash bonuses. Julian Richer will announce to staff on Tuesday that he has transferred 60% of his shares into a John Lewis-style trust. [/perfectpullquote]A John Lewis style trust, eh? How do they work?
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Employee ownership trusts If you own a trading company, you can now sell some, or all, of your shares to an employee ownership trust (EOT) (subject to satisfying certain conditions) for full market value without incurring any capital gains tax liability in a way which also benefits your employees. [/perfectpullquote]Oh.
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]No capital gains, income or inheritance tax liabilities should arise on the disposal of a controlling interest in a company to an EOT (or on the subsequent receipt of the purchase price by the former shareholders)[/perfectpullquote]Gosh.
The Treasury doesn’t get 20% of the sum, does it?
Now, I know people who shout that obeying the tax law exactly as it is written is tax abuse. I’ve even got into an argument with Richard Brooks, one of the people being funded by Julian Richer, on the point. Brooks insisting that Vodafone obeying the law on controlled foreign companies was tax avoidance, me insisting it wasn’t.
But of course this is different. Entrepreneur cashes in his life’s work without paying capital gains or income tax. Yes, that’s obviously different because reasons.
Julian Richer is entirely and absolutely obeying the law here. What’s going to be interesting though is the reaction from those tax campaigners who complain so bitterly when others do exactly the same, entirely and wholly obey the law.
Think about Arcadia, Taveta and all that for a moment. Tina, Lady Green, does not pay UK tax on the dividends she receives. This is loudly condemned. It has most certainly been called tax abuse, tax dodging and tax avoidance. The reason she doesn’t pay that UK tax is because she’s a foreigner living in a foreign country.
But this is different because, right? Even, tax abuse and tax compliance all depend upon who is doing it? Will tax campaigners insist that it’s just fine because mates n’all?
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The Richer they get the less they pay. Shame in this case as, apart from the hypocrisy and virtue signalling, the sell off to staff, tax break included, is laudable.
Really?
So the richest pay less than the less rich, then the less rich pay less that those even less rich, so the even less rich pay less than the poorest.
So the richest pay less than the poor!
You really haven't thought that one through, have you?
Proportionally the rich pay much less tax than the poor. A family of four on an average wage pays approximately 72% of their income in tax, firstly income tax, then what remains is taxed again via council tax, VAT, fuel tax etc..
Furthermore most of the wealthy structure their activities through companies and pay corporation tax rather than the higher income tax whenever possible.
That's all nonsense. The average person pays around a third of their post-tax income on housing costs, and quarter or more on food and a fair bit on other items without VAT. You simply cannot get to 72%.
Median wage = £29,000. Tax & NI = £5,742. Post tax income = £23,258. Say £15,000 on untaxed housing, untaxed food and non-VAT items leaves £8,258. Say average of 25% tax on that spending = £2,064. So total tax = £7,806. That's 27% of gross income. Maybe your numerals are the wrong way around?
And the rich only "pay less" if they don't spend it on thing that are taxed. But eventually income from savings will be taxed, and the eventual spending of those savings will be taxed.
And CT is lower than income tax, but then you pay your marginal rate when anything is dividended, and then you pay VAT etc. when you spend it. If you use a business, then you pay 20% CT and then perhaps 45%, instead of 45% plus NI at less than 20%. You can only "pay less" if you can dividend amounts that keep you below the tax rate thresholds - but then your income isn't "rich" is it?
If you calculate tax to include the tax cost of the items you buy, which you should do because it is you who is paying, it is about 72%. Somewhere I've archived a pdf research paper detailing the tax chain process meticulously. I'll dig it out when I return home, but for now the calculations in the paper work roughly like this, if I remember correctly.
If you buy a pair of shoes out of your taxed income included in the price is VAT, so you are already up to forty percent or more (VAT + income tax + NI).
The taxed fuel used to deliver your shoes is also included in the price. The national insurance and the tax paid to the employees of the shoe shop, the taxes for the energy used to run the shop, the business rates paid by the shop etc. are included in the price which you pay.
Many of the items used to make, deliver and sell you the shoes have high tax costs, such as buying and running the delivery van (the retail price of the van includes high tax costs associated with its manufacture). Of course companies offset some of the taxes they pay against against their own tax liabilities, but they need to pass on to the customer their corporation and other tax costs.
So if you earn 100 pounds you get to buy a product that if no taxes were involved in the process would be worth about 27 pounds.
Of course if you fly or buy a beer it is much worse, but you get the idea. Smokers are the worst effected, the no tax in the chain for a packet of 20 cost is about 20p, for which they have to earn 10 pounds; but that probably is a good thing.
There really are no items that do not have a tax cost, including housing, food and non-VAT items, they all have high tax costs built in, which the customer pays. Even going to work by foot includes a tax cost, your shoes wear out and need replacing.
Interestedly the research paper shows a commonality across most European countries, ranging from about 70-75%. The paper is about 10 years old, but since taxes have risen since then the figure is not likely to be less today.
As for the rich paying a lower proportion of their income in tax than the less well off, that is easily explained. If you buy a high value HiFi product, for instance, the proportion of tax in the purchase price is lower than if you by a cheap ghetto-blaster. Partly because the income tax paid by the worker, and therefore passed on to the customer, is similar for a high end product as it is for a low end product, but also because adding perceived value to a product doesn't effect the pound for pound over all tax liability very much.
Additionally if you are able to save, you are not spending and therefore a proportion of your income escapes from the tax chain (although the return on savings doesn't). So the wealthy who save money don't pay taxes incurred in the same proportion as those who spend all their income.
It might be interesting to factor in municipal car parking charges, you are effectively being taxed to park in a place that you paid for in the first place, but one must draw the line somewhere.
As I said the average proportion of income paid in tax is about 72%, I was careful not to say the average level of direct taxation is anyway near that, but when you add up the direct, indirect and included in price tax, 72% paid might actually be an underestimate .
Where is this report of you have?
Please give formal reference and any other discussion of the actual document.
As I said when I return home I will dig out the paper.
I thought you would have returned home by now. My mistake.
When do you expect to return home?
Your original claim was that the richer pay less tax than those poorer than them.
Now your claim is that the proportion of their income paid in tax by the richer is lower than the tax paid by the poorer.
That is very different from your original claim.
Please don't make your original claim again.
"Julian Richer is selling Richer Sounds, his audio retailing company. Which is great, obviously, we always like to see those who have done well cashing in. But the thing is he’s structured the sale in a manner that means he doesn't have to pay any capital gains tax."
Please don't tell me what I can and can not say.
Well carry on making misleading claims then.
It doesn't show you or your arguments in a good light.
I didn't tell you. I asked you politely not to make your original misleading claim again.
Please don't tell what I can and cannot tell you.
Capital Gains Tax (with its close relative, income tax) is immoral.
We need to encourage more like Julian Richer to set up and provide jobs for others.
And why not no CGT?
And while we are at it, no inheritance tax either (or at least the USA threshold ~ £10 million per couple) so that more wealth will be attracted to the UK and the wealthy will not retire elsewhere.
That wealth is likely to generate more income tax, more VAT, more Council tax and more employment opportunities than IHT.
https://taxfoundation.org/estate-and-inheritance-taxes-around-world/
"Thirteen Countries or Tax Jurisdictions Have Repealed Inheritance or Estate Taxes Since 2000"
Macau 2001, Portugal 2004, Slovak Republic 2004, Sweden 2005 Russia 2005,
Hong Kong 2006, Hungary 2006, Singapore 2008 Austria 2008, Liechtenstein 2011,
Brunei 2013, Czech Republic 2014, Norway 2014.
I choose to buy an item at the price offered. I then demand a partial refund if the person selling me that thing makes a profit. Quite a weird and unjustifiable claim, surely?