WEBVTT - The Tory Tax Problem May Be Britain’s, Too 0:00:00.160 --> 0:00:02.480 There is an obligational ministers to tell the truth and 0:00:02.600 --> 0:00:04.440 saying that your taxes are in order when you know 0:00:04.559 --> 0:00:13.160 they're not is not telling the truth. There we have 0:00:13.400 --> 0:00:16.720 Dan Needle, who is the founder of Tax Policy Associates, 0:00:16.720 --> 0:00:19.720 and here's the tax expert who made the former chancellor 0:00:19.720 --> 0:00:24.279 and deems Zharwie's tax issue public. He joined Bloombergoli this 0:00:24.320 --> 0:00:28.280 week to wade in on the ongoing drama that's become 0:00:28.320 --> 0:00:30.600 something of a scandal in facts around in the Conservative 0:00:30.600 --> 0:00:35.080 Party chairman and whether he has been truthful about his 0:00:35.200 --> 0:00:39.920 tax affairs. And listening to Dan talking, you could draw 0:00:39.960 --> 0:00:44.239 the conclusion that he doesn't think Zahawi is being entirely truthful. 0:00:44.280 --> 0:00:46.720 And of course British Soon, AXT spokesman this week, has 0:00:46.800 --> 0:00:51.640 declined to vouch for the former chancellor's honesty. But it's 0:00:51.680 --> 0:00:54.240 shot me yet another light, hasn't it on the deep 0:00:54.240 --> 0:00:58.920 connections between the Tory Party and the city of London, 0:00:59.000 --> 0:01:01.800 but also the enormous wealth of many of the people 0:01:02.280 --> 0:01:06.360 right at the top of the Conservatives. And this big 0:01:06.400 --> 0:01:09.320 problem right in the middle of the economic troubles that 0:01:09.360 --> 0:01:12.440 the country finds itself in, is causing a great, big 0:01:12.480 --> 0:01:17.760 political headache for the Prime Minister. I'm David Merritt and 0:01:17.800 --> 0:01:20.319 this is In the City Plumberg's podcast, connecting you to 0:01:20.319 --> 0:01:22.440 the stories and the voices at the heart of the 0:01:22.480 --> 0:01:25.800 City of London. So this week the Tory Party is 0:01:25.840 --> 0:01:28.360 in term on again, this time about the tax affairs 0:01:28.440 --> 0:01:32.240 a former chancellor, the deems a Harwi. And we've learned 0:01:32.240 --> 0:01:36.640 a lot about Mrs a Harwi's enormous wealth and the 0:01:36.680 --> 0:01:39.960 relatively small amount of tax he's paid on that, and 0:01:40.000 --> 0:01:43.479 perhaps he's quotes carelessness with filling out his tax return, 0:01:43.560 --> 0:01:45.840 something that I know is on everyone's mind as the 0:01:45.920 --> 0:01:50.160 deadline loom. So we spoke with Professor A ruined Advanney, 0:01:50.360 --> 0:01:53.840 who studies tax systems around the world, how governments deal 0:01:54.480 --> 0:01:57.760 with wealth, and he's got some suggestions for how the 0:01:57.800 --> 0:02:02.440 government could better handle the very highly politically charged question. 0:02:02.520 --> 0:02:06.080 But first we spoke with our man in Westminster and 0:02:06.200 --> 0:02:09.440 the lord of all the WhatsApp chats groups amongst Tory 0:02:09.560 --> 0:02:14.680 MPs are very own Alex Wickham. Alex, thank you for 0:02:14.720 --> 0:02:16.919 coming back to in the City pleasure. Thank you for 0:02:16.960 --> 0:02:20.440 having me. Have you done your tax return yet? I 0:02:20.480 --> 0:02:25.600 actually have the all the sort of little journalistic add 0:02:25.600 --> 0:02:29.160 ons all good. Yeah. I actually came into the office Loso. 0:02:29.200 --> 0:02:31.519 We came to do obviously, the deadlines looming. I thought 0:02:31.520 --> 0:02:34.960 I needed, I need to be undistracted, and it was added. 0:02:35.040 --> 0:02:36.799 You know, it's given an added piquancy. I think that 0:02:36.840 --> 0:02:38.680 she is never a fun job. But the kind of 0:02:38.720 --> 0:02:42.120 the contrast between you know, all those boxes that say 0:02:42.120 --> 0:02:46.560 things like, you know, foreign investments, income from other sources 0:02:46.560 --> 0:02:50.079 all around the world, you know, no, no, no, no no, 0:02:50.560 --> 0:02:54.320 and you know, poultry amount of kind of interest given 0:02:54.440 --> 0:02:56.440 to me by my bank. And I just sort of 0:02:56.480 --> 0:02:59.600 sat there comparing this with the eye popping numbers of 0:02:59.600 --> 0:03:01.320 our form a chancer and thinking, well, I feel a 0:03:01.360 --> 0:03:04.239 little bit insignificant. Do you think people around the country 0:03:04.240 --> 0:03:06.400 are feeling that as well? I think that is exactly 0:03:06.800 --> 0:03:09.960 exactly it. You know, regardless of the ins and outs 0:03:10.040 --> 0:03:12.640 of whether he's paid his taxes, whether he's in whether 0:03:12.680 --> 0:03:14.880 he's in trouble with the taxman, etcetera, etcetera, this his 0:03:15.040 --> 0:03:18.360 scale of this. It's just something that sums up one 0:03:18.400 --> 0:03:20.400 of the problems that the government has, which is if 0:03:20.400 --> 0:03:22.360 you're if you're a normal person, you look at the 0:03:22.440 --> 0:03:25.079 Deans of Hardway and you sort of go well, I mean, 0:03:25.120 --> 0:03:27.040 how can you have forgotten to pay three three million 0:03:27.040 --> 0:03:29.720 pounds in taxes? How can you have been careless about that? 0:03:29.760 --> 0:03:33.280 As his statement his own statement says, I mean careless 0:03:33.440 --> 0:03:35.920 is oh yeah, you know I missed, like you say, 0:03:36.360 --> 0:03:38.800 ten pounds of interest off my off my taxmiit or something. 0:03:39.080 --> 0:03:42.760 We've obviously we've had the non dom raw over the 0:03:42.760 --> 0:03:46.480 prime minister's wife. We all know about his extensive wealth. 0:03:46.600 --> 0:03:48.360 Is the woralth is prime minister we've had and then 0:03:48.400 --> 0:03:50.400 of course we've just had this issue about the former 0:03:50.440 --> 0:03:54.560 Prime minister Boris Johnson and the BBC chairman Richard Sharp 0:03:54.640 --> 0:03:59.200 alone for eight hundred thousand pounds to cover his I 0:03:59.200 --> 0:04:00.720 mean you know that sort of and a number that 0:04:00.760 --> 0:04:04.240 people won't be able to identify with. And so in 0:04:04.320 --> 0:04:05.800 terms of kind of how much you would need to 0:04:05.840 --> 0:04:07.320 live your life, it's more than a lot of people 0:04:07.360 --> 0:04:10.600 learned in their careers. So how much damage is all 0:04:10.640 --> 0:04:13.720 of this doing out there in the country? Do you 0:04:13.760 --> 0:04:17.599 think in terms of the political fortunes of this government. 0:04:17.920 --> 0:04:19.600 I think quite a lot. I mean, on the one hand, 0:04:19.760 --> 0:04:21.799 you know, the tax of the private tax of hairs 0:04:21.839 --> 0:04:25.000 of cabinet ministers are quite technical, very technical, and so 0:04:25.240 --> 0:04:27.360 even we as journalists don't understand the ins and outs 0:04:27.360 --> 0:04:28.840 of them. We don't know the full details. Yet the 0:04:28.880 --> 0:04:31.320 Prime Minister doesn't. That's why he's you know, called this 0:04:31.400 --> 0:04:34.560 inquiry into the Deans are We. But it's the principle 0:04:34.600 --> 0:04:37.520 that everybody can get. Everybody understands it. Like you say, 0:04:37.560 --> 0:04:40.200 if a normal person goes to the bank for a 0:04:40.240 --> 0:04:44.440 ten thousand pounds loan to do some home renovations or something, 0:04:45.000 --> 0:04:49.320 you know, compared to the money that Boris Johnson is 0:04:49.360 --> 0:04:52.200 talking you know, is talking about, and then and then 0:04:52.240 --> 0:04:54.359 certainly on on an even different level to that than 0:04:54.520 --> 0:04:57.160 than the demons of are We money. And there's nothing 0:04:57.160 --> 0:05:00.360 intrinsically wrong with being a rich person a and who's 0:05:00.400 --> 0:05:03.680 been successful in business. It's great that we politics can 0:05:03.760 --> 0:05:07.320 attract successful business people into it to to you know, 0:05:07.440 --> 0:05:10.080 get the finest minds and all of that sort of thing. 0:05:10.600 --> 0:05:13.440 But the problem is when you've got the deems are 0:05:13.480 --> 0:05:17.560 Harway worth tens of millions of pounds having to explain 0:05:17.600 --> 0:05:20.680 to Rishi Sunac with his family worth hundreds of millions 0:05:20.680 --> 0:05:23.520 of pounds about you know, where this five million pounds 0:05:23.560 --> 0:05:26.080 worth of tax has gone missing? It is just, you know, 0:05:26.200 --> 0:05:28.599 it just feeds into the native that the Tories just 0:05:28.640 --> 0:05:31.960 don't get it during a cost of in crisis, inflation, 0:05:32.240 --> 0:05:34.840 prices rising, all of this sort of thing. It just 0:05:34.920 --> 0:05:37.760 feeds into it. And everybody can understand that, and everybody 0:05:37.760 --> 0:05:40.800 can see, you know, ultimately they're not quite like us. 0:05:40.920 --> 0:05:42.440 But you know, to be fair, as you said, we 0:05:42.440 --> 0:05:44.960 want to attract business people into politics. And that's just 0:05:45.040 --> 0:05:47.920 remind everyone that the Deems are Harry founded the polling 0:05:48.000 --> 0:05:51.800 company you gov went on to be enormously successful and 0:05:51.839 --> 0:05:54.400 influential still is in fact, you know, ironically, of course, 0:05:54.400 --> 0:05:57.760 I'm looking at a you gov poll. In your story, Alex, 0:05:57.800 --> 0:06:00.520 you wrote going the Tories are lagging a buy more 0:06:00.560 --> 0:06:02.240 than twenty points. But you know it's you guys who 0:06:02.279 --> 0:06:03.880 are giving that information. But I think you know, the 0:06:04.960 --> 0:06:08.080 broader point here is that we do want successful people, 0:06:08.360 --> 0:06:10.240 or people who know how to run businesses and know 0:06:10.320 --> 0:06:14.880 how to create wealth and boost the economy running the government. 0:06:15.040 --> 0:06:17.760 So shouldn't we be a little bit more relaxed about 0:06:17.839 --> 0:06:20.479 some of the stuff. I mean, I think British voters 0:06:20.800 --> 0:06:24.320 historically they don't really go for the politics of envy. 0:06:24.360 --> 0:06:26.560 You knows, if you look at the last hundred years 0:06:26.560 --> 0:06:30.720 of British political history, they haven't really elected many hardcore socialists. 0:06:30.720 --> 0:06:34.479 They haven't really you know, tried to soak the rich 0:06:34.600 --> 0:06:37.600 too much, you know, generally certainly compared to perhaps some 0:06:37.960 --> 0:06:41.400 other countries. But you know, you just feel that this 0:06:41.480 --> 0:06:43.560 is on a different scale, you know, and where it's 0:06:43.640 --> 0:06:46.760 landed in the political cycles. The timing, right, it's the timing. 0:06:47.160 --> 0:06:49.159 Last time we chatted, I think, on in the city 0:06:49.640 --> 0:06:52.479 it was in the absolute height of the trust drama 0:06:52.640 --> 0:06:55.200 and we were taking bets about how long she was 0:06:55.200 --> 0:06:57.480 going to last. And we all know about the lettuce obviously, 0:06:57.520 --> 0:06:59.599 and I think she didn't even last out that day. 0:06:59.640 --> 0:07:02.440 But and you talk memorably about the I think the 0:07:02.480 --> 0:07:06.000 exploding head and vomit emojis on the on the tack 0:07:06.080 --> 0:07:09.359 groups on what'sapp? What what sort of emojis are we 0:07:09.400 --> 0:07:14.880 seeing at the moment of people, how people really chronicling 0:07:14.920 --> 0:07:17.840 this on those all important WhatsApp groups that I mean, 0:07:18.040 --> 0:07:19.720 the mood and the Tory Party, let's be honest, is 0:07:19.760 --> 0:07:22.840 never good and it hasn't been for for years. But 0:07:23.880 --> 0:07:26.640 I mean it is true though that we're only a 0:07:26.680 --> 0:07:28.920 few months into is she seen next premiership. He would 0:07:28.960 --> 0:07:31.400 absolutely have hoped for a honeymoon period. He would have 0:07:31.440 --> 0:07:33.360 hoped for people to be saying, oh, come on, give 0:07:33.440 --> 0:07:35.040 him a chance. He's only been in for five minutes. 0:07:35.040 --> 0:07:37.160 You know he needs to he needs to work out 0:07:37.200 --> 0:07:40.440 all works and you know have at least a couple 0:07:40.440 --> 0:07:42.280 of years before, you know, before we make it make 0:07:42.320 --> 0:07:44.680 a judgment on whether it's a good prime minister or not. 0:07:45.040 --> 0:07:49.080 But already Tory MP's are grumbling. And the main issue, 0:07:49.120 --> 0:07:53.480 to be honest, is gross and tax and you know 0:07:53.680 --> 0:07:56.960 the Treasury briefing out very clearly no tax cuts coming 0:07:57.000 --> 0:07:59.000 in the in the March budget. You know you're going 0:07:59.080 --> 0:08:01.760 to have to wait. The public finances that we had 0:08:01.760 --> 0:08:04.760 out this week worse than bad, right, worse than expected 0:08:05.120 --> 0:08:09.880 in terms of government debt and borrowing. And you know, 0:08:10.000 --> 0:08:12.520 there is just no good news from the government. I mean, 0:08:12.560 --> 0:08:14.560 there is a way to raise more money that is 0:08:14.600 --> 0:08:17.440 perhaps politically palatable, and you can imagine if there was 0:08:17.440 --> 0:08:20.040 a labor government in power at the moment that they 0:08:20.080 --> 0:08:22.840 would be looking at things like capital gains, which was 0:08:22.920 --> 0:08:27.400 the structure that Mr Zahari is is using. Two taxis 0:08:27.600 --> 0:08:30.200 his wealth. And you know, people who work in the 0:08:30.240 --> 0:08:32.440 city of London, the people who are the highest earners 0:08:32.480 --> 0:08:35.959 in the country. There's a relatively small constituency of people 0:08:36.000 --> 0:08:39.640 who you could potentially tap from all tax but politically 0:08:39.679 --> 0:08:42.800 broadly that could find support in the country. But the 0:08:43.240 --> 0:08:46.400 connections to the city are just a little bit too deep, 0:08:46.440 --> 0:08:50.520 aren't they for them to consider sort of rinsing their 0:08:50.840 --> 0:08:53.280 backers in that way. And a good example of that 0:08:53.360 --> 0:08:56.480 is is non dom status, where labor have said, you know, 0:08:56.559 --> 0:09:00.600 we're scrap no non dom status and spend them on 0:09:00.720 --> 0:09:03.840 a pay rise that probably quite popular in the public right, 0:09:03.960 --> 0:09:06.240 and it's it's a populist policy. Let's be honest. You know, 0:09:06.320 --> 0:09:09.240 scrapping nondom status raise a bit of money, but it's 0:09:09.240 --> 0:09:12.280 not you know, it's not as a silver bullet that 0:09:12.280 --> 0:09:14.640 that fixes the economy. I mean, Mrs Soon that gave 0:09:14.679 --> 0:09:18.400 hers up right, and she did. I mean I wonder 0:09:18.440 --> 0:09:21.080 if that's whether the story might turn next because talking 0:09:21.120 --> 0:09:24.760 of HMRC settlements, but I mean labor can it is 0:09:24.760 --> 0:09:29.520 easy for labor to say, look, identify and take advantage 0:09:29.600 --> 0:09:31.760 of the of the Tory's weakness as being seen as 0:09:31.840 --> 0:09:33.600 out of touch and being seen as on the side 0:09:33.640 --> 0:09:36.840 of the super rich. They can pick something like nondom status, 0:09:36.920 --> 0:09:39.400 say we'd get rid of it. It's not gonna probably 0:09:39.520 --> 0:09:42.400 do that much in damage to the economy in terms 0:09:42.400 --> 0:09:47.280 of attracting investment and talent into Britain, but it's certainly 0:09:47.280 --> 0:09:49.480 is something that will resonate with people, and you know, 0:09:49.520 --> 0:09:52.959 speaking to Tory MP's it is something that increasing numbers 0:09:52.960 --> 0:09:54.160 of Tory and PISA are saying, We're going to say, 0:09:54.160 --> 0:09:56.440 why don't we just scraped nondom status, you know, why, 0:09:56.559 --> 0:09:58.960 why why don't we just try and get ahead of 0:09:59.000 --> 0:10:01.240 labor on some of this stuff, because otherwise, going into 0:10:01.240 --> 0:10:03.040 an action campaign, they're just going to paint us is 0:10:03.360 --> 0:10:06.079 you know, helping out the helping out the super rich. 0:10:06.240 --> 0:10:10.280 And ultimately, whether it's the Boris Johnson BBC story, whether 0:10:10.280 --> 0:10:12.680 it's the Deems are Harby in his taxes, this idea 0:10:13.120 --> 0:10:16.800 that a sort of elite you know, behind closed doors, 0:10:16.920 --> 0:10:19.360 sorts it all out with HMRC or sorts all out 0:10:19.400 --> 0:10:22.920 with the BBC. It can sound a bit conspiratorial, but 0:10:23.000 --> 0:10:25.640 also there's an element of truth to it and that 0:10:25.840 --> 0:10:28.199 is the sort of thing that really does wind people 0:10:28.240 --> 0:10:30.160 up because it makes it just makes people a bit 0:10:30.400 --> 0:10:34.720 a bit sick and and you know, ultimately, if if 0:10:35.520 --> 0:10:39.080 when we're doing our tactual returns, we're we're careless, then 0:10:39.360 --> 0:10:42.040 we are unlikely to be able to negotiate a settlement 0:10:42.080 --> 0:10:45.120 with HMRC that makes every unhappy and we don't have 0:10:45.120 --> 0:10:47.480 to worry about it. It's going to be much more serious. Well, 0:10:47.520 --> 0:10:50.120 I was actually when I finished, when I finally filed 0:10:50.160 --> 0:10:52.160 my one, not we came do actually you know the 0:10:52.559 --> 0:10:55.440 thing pinged back that I've actually overpaid and I was 0:10:55.480 --> 0:10:59.040 during rebate, you know, ninety four pounds. So there there 0:10:59.080 --> 0:11:01.160 won't be a career in politics for you. There. I 0:11:01.160 --> 0:11:04.319 went out and celebration straight away. Excellent, Alex Wikins, thank 0:11:04.320 --> 0:11:12.120 you so much for joining us. Okay, so this whole 0:11:12.160 --> 0:11:16.160 conversation about Zahawi's tax problems got us thinking a little 0:11:16.160 --> 0:11:19.880 bit more about how the entire tax system works, or 0:11:20.000 --> 0:11:22.120 rather doesn't when it comes to how much the wealthy 0:11:22.440 --> 0:11:24.719 are paying. And we came across the paper from the 0:11:24.840 --> 0:11:26.800 LSC that asked this question how much tax are the 0:11:26.920 --> 0:11:30.599 rich really pay? And very pleased to say, one of 0:11:30.640 --> 0:11:33.920 its co authors, Professor Aaron Advani, has joined us in 0:11:33.920 --> 0:11:36.400 the London studio. He's an associate professor in the Economics 0:11:36.400 --> 0:11:39.000 Department at the University of Warwick, and he's also a 0:11:39.080 --> 0:11:43.320 research fellow at the Institute for Fiscal Studies. Are welcome 0:11:43.400 --> 0:11:46.240 to in the city. I guess my first question is, 0:11:46.280 --> 0:11:48.640 I mean, did this this big story about Saharawi has 0:11:48.679 --> 0:11:52.040 been dominating the news all week? This is what you 0:11:52.120 --> 0:11:56.679 study for your work. Do you were you surprised by 0:11:56.720 --> 0:11:59.320 by what the world is now discovering about his tax offers. 0:12:00.040 --> 0:12:01.880 It's worth saying, you know, we we have access to 0:12:02.280 --> 0:12:04.000 data from H Marcy for all of the work that 0:12:04.040 --> 0:12:05.520 we do, and it's all anonymous, so we don't know 0:12:05.520 --> 0:12:08.480 anything about kind of particular individuals. But I think one 0:12:08.480 --> 0:12:10.200 of the you know, striking things for me was less 0:12:10.200 --> 0:12:13.199 about the specifics of his apparent non compliance is he's 0:12:13.240 --> 0:12:15.600 not paying what you're supposed to have paid. But actually 0:12:15.640 --> 0:12:17.160 the fact that when you sort of step back, you 0:12:17.200 --> 0:12:20.040 see that the story is that he got twenty seven 0:12:20.080 --> 0:12:23.040 million pounds in capital gains. It's it's been reported, and 0:12:23.080 --> 0:12:25.760 he was supposed to pay about three point seven million 0:12:25.760 --> 0:12:27.640 pounds in tax. So when you think of what that 0:12:27.760 --> 0:12:30.880 is as a tax rate, that's like strikingly low. The 0:12:30.880 --> 0:12:33.199 thing about that which might surprise other people if they've 0:12:33.200 --> 0:12:35.240 sort of sating down the numbers, is that it's very 0:12:35.240 --> 0:12:37.120 low compared to what you'd expect for someone with millions 0:12:37.120 --> 0:12:39.280 of pounds. You know, normally we'd think of the headline 0:12:39.360 --> 0:12:42.360 tax rate for people who are high income as being 0:12:42.520 --> 0:12:46.400 forty five as the top right, and then there's a 0:12:46.400 --> 0:12:48.559 couple of pence also of national insurance that they're paying. 0:12:48.800 --> 0:12:50.680 So you think, you know, you'd be paying getting on 0:12:50.760 --> 0:12:53.199 for half of that money away, but actually it's much 0:12:53.240 --> 0:12:56.040 much lower. And that's that's because capital gains have a 0:12:56.160 --> 0:12:58.120 number of features. One is that they just have a 0:12:58.160 --> 0:13:00.560 lower tax rate in general. But then on top of 0:13:00.600 --> 0:13:03.080 having the lower tax rate of rather than that top 0:13:04.520 --> 0:13:07.040 you could at the time get up to ten million 0:13:07.080 --> 0:13:09.319 pounds only ten percent. That's now gone down to one 0:13:09.320 --> 0:13:11.840 million pounds, but at ten percent, and so that's ten 0:13:11.880 --> 0:13:14.240 percent is the sort of rate you'd expect someone on 0:13:14.360 --> 0:13:16.440 fifteen tho pounds a year to be paying, so below 0:13:16.600 --> 0:13:19.400 a full time million wage salary, and that's the kind 0:13:19.400 --> 0:13:21.160 of rate you could you could get before up to 0:13:21.200 --> 0:13:23.080 ten million pounds. You can now get that on the 0:13:23.080 --> 0:13:25.840 first million pounds of capital gains. These are numbers which 0:13:25.840 --> 0:13:28.680 are astonishing for most members of the public. Could you 0:13:28.679 --> 0:13:30.920 explain a little bit more about this difference. Then there's 0:13:30.960 --> 0:13:33.160 capital gains, the different rate of tax you can pare 0:13:33.160 --> 0:13:38.000 on capital gains versus normal income, and why that structural 0:13:38.800 --> 0:13:42.360 difference favors the wealthy. Capital ens are the sort of 0:13:42.400 --> 0:13:44.840 thing that most people will never experience in their life 0:13:44.920 --> 0:13:46.480 in the way they have to report tax on it. 0:13:46.640 --> 0:13:48.520 If you think of anything in capital and most people 0:13:48.559 --> 0:13:50.320 think of having a second home. So somebody who owns 0:13:50.320 --> 0:13:53.040 a second home and sells it, if the value of 0:13:53.040 --> 0:13:54.720 that home increased between the time they bought it at 0:13:54.720 --> 0:13:56.680 the time they sold it, they have to pay tax 0:13:56.679 --> 0:13:59.400 on them. That's capital gainst tax. That's actually a very 0:13:59.440 --> 0:14:02.760 small share of what most capital gains come from. Most 0:14:02.840 --> 0:14:05.840 capital gains are actually from the ownership of businesses. So 0:14:05.880 --> 0:14:07.520 if you own a business, you set up a business, 0:14:07.600 --> 0:14:09.160 at some point you sell it, which is the example 0:14:09.200 --> 0:14:11.559 you have here with the demons aw We, or indeed, 0:14:11.559 --> 0:14:13.240 if you set up a business and then at some 0:14:13.280 --> 0:14:14.959 point you just liquidate the business, so you don't sell 0:14:15.000 --> 0:14:16.160 that no one wants to buy it from you, but 0:14:16.200 --> 0:14:18.679 you just say, I'm sort of shutting down the business, 0:14:18.679 --> 0:14:20.280 and all of the value of the business now comes 0:14:20.280 --> 0:14:22.920 to me. Then the change in the value over that 0:14:22.960 --> 0:14:25.000 time to the value that you sell the business for you, 0:14:25.280 --> 0:14:27.640 the value of the business when you liquidate it less 0:14:27.720 --> 0:14:29.560 the value it was when you set it up. That's 0:14:29.600 --> 0:14:32.120 what you get in capital gains. And those capital gains 0:14:32.160 --> 0:14:35.320 are taxed are much much lower tax rates than income 0:14:35.360 --> 0:14:37.760 tax rates. So as I said, the sort of headline rates, 0:14:38.480 --> 0:14:41.200 there's a higher twenty eight percent if it's on second 0:14:41.360 --> 0:14:44.320 and additional properties, and then there's this special low ten 0:14:44.360 --> 0:14:47.720 per cent rate for people who have a business that 0:14:47.760 --> 0:14:49.800 they own and manage. They get a lower rate on 0:14:49.840 --> 0:14:53.920 the first now million pounds. So ZAHOWI sold this business 0:14:53.960 --> 0:14:55.920 and that's where this big lump sung come came from. 0:14:56.040 --> 0:14:58.560 So to be to be fair, I guess this isn't 0:14:58.600 --> 0:15:02.080 the sort of inc that people would expect to generate 0:15:02.440 --> 0:15:04.320 year or year out. So is that one of the 0:15:04.320 --> 0:15:07.240 reasons why the tax rate is actually nominally, you know, 0:15:07.320 --> 0:15:09.880 quite significantly lower for it. It's interesting the structure of 0:15:09.880 --> 0:15:12.160 capital gainst tax has changed so many times over the 0:15:12.240 --> 0:15:14.160 last you know, changed about every ten year. So there's 0:15:14.160 --> 0:15:17.760 a big reform by Nigel laws gotten Brown and then 0:15:17.760 --> 0:15:21.440 two eight was Alistair Darling. And there's the kind of 0:15:21.440 --> 0:15:23.840 difficulty with Catholic capital gains as you want to find 0:15:23.880 --> 0:15:26.920 some way to ensure that you are kind of encouraging entrepreneurship. 0:15:27.200 --> 0:15:29.280 Like one of the things that capital gains are about 0:15:29.400 --> 0:15:31.080 is if you set up a business and grow it, 0:15:31.280 --> 0:15:33.160 then that's a capital gain. So you want to encourage that. 0:15:33.600 --> 0:15:35.960 But you don't want to encourage is people sort of 0:15:35.960 --> 0:15:37.960 setting up what is which is not the case certainly 0:15:38.000 --> 0:15:39.640 in the Harwer's case, where you know you got was 0:15:39.680 --> 0:15:42.000 clearly a very large and very successful company, but you 0:15:42.000 --> 0:15:43.960 don't want to encourage is along the side of you know, 0:15:44.040 --> 0:15:46.040 the small number of cases of someone like Zahawi who 0:15:46.040 --> 0:15:48.240 sets up a successful business, A lot of people who 0:15:48.240 --> 0:15:51.400 have a consultancy business that would be just someone paying 0:15:51.440 --> 0:15:53.920 them an income to work as a consultant, but instead 0:15:53.960 --> 0:15:56.520 they take their money through a consultancy business and keep 0:15:56.520 --> 0:15:58.040 the money in the business and at some point dissolve 0:15:58.080 --> 0:15:59.800 the company and get the money out that way and 0:15:59.800 --> 0:16:01.160 get the low rate. So what you don't want to 0:16:01.240 --> 0:16:04.600 encourage is someone who would otherwise have been paying income 0:16:04.640 --> 0:16:07.240 tax and two percent national insurance who instead is now 0:16:07.360 --> 0:16:10.160 able to pay this sort of ten rate by just 0:16:10.360 --> 0:16:12.440 getting money paid not to them personally, be getting paid 0:16:12.440 --> 0:16:14.520 to their business and then at some point them taking 0:16:14.520 --> 0:16:15.920 the money out of the business. And so that's that's 0:16:15.960 --> 0:16:17.720 kind of what that trade off is as a one. 0:16:17.800 --> 0:16:20.200 One way to square that circle is to say, well, 0:16:20.280 --> 0:16:22.360 what you could do is to have a tax rate 0:16:22.360 --> 0:16:24.440 on capital gains that looks more similar to the income 0:16:24.480 --> 0:16:27.200 tax rate, but where because you know, as you say, 0:16:27.320 --> 0:16:29.040 capital gains are quite lumpy, they sort of come out 0:16:29.080 --> 0:16:31.440 at one point in time rather than annually. What you 0:16:31.480 --> 0:16:34.480 could do is to average out the capital and say, okay, 0:16:34.480 --> 0:16:37.480 you've owned this business for ten years and you've made 0:16:37.560 --> 0:16:39.560 million pounds or whatever it is. Will divide that up 0:16:39.600 --> 0:16:41.480 and think of that as two point seven million pounds 0:16:41.520 --> 0:16:43.480 a year, and that that's how we'll think about the 0:16:43.520 --> 0:16:45.000 taxation of it. And then that would be a way 0:16:45.000 --> 0:16:46.960 in which if you've i mean two points of a 0:16:46.960 --> 0:16:48.360 million punis is still gonna be in the top rate. 0:16:48.520 --> 0:16:50.080 But you know, if what you ended up with was 0:16:50.320 --> 0:16:52.680 forty pounds a year, then not all of that would 0:16:52.680 --> 0:16:55.080 be taxed at that top rate because it's clearly much 0:16:55.120 --> 0:16:57.160 lower than what we would charge for the fort rate. 0:16:57.440 --> 0:16:59.760 I mean Britain of course, has a big problem on 0:17:00.000 --> 0:17:02.280 accent that we need to somehow raise more. We had 0:17:02.320 --> 0:17:05.800 a big, big feature out this week on Bloomberg, like 0:17:05.960 --> 0:17:09.360 the Little Audrick, about the funding problems of the NHS, 0:17:09.400 --> 0:17:12.000 and there's some pretty alarming charts in that around the 0:17:12.160 --> 0:17:15.679 need for Britain to raise more in tax But Britain 0:17:15.720 --> 0:17:19.440 needs to somehow pull in more money, whether it's from 0:17:19.680 --> 0:17:23.960 change of the coupital gains system, somehow boosting the coffers 0:17:23.960 --> 0:17:26.280 of the treasury. How in your view should they do that? 0:17:26.320 --> 0:17:30.359 Should they be pursuing the wealthy more to pay bigger 0:17:30.359 --> 0:17:32.520 share of the tax income, So to think about it 0:17:32.640 --> 0:17:35.520 less as pursuing the wealthy and more as pursuing wealth. 0:17:35.640 --> 0:17:37.800 And so the distinction there is it's not about trying 0:17:37.800 --> 0:17:41.080 to tax people just because they are rich. It's particularly 0:17:41.119 --> 0:17:44.800 about trying to tax money that comes from wealth, from 0:17:44.840 --> 0:17:47.520 owning assets and getting a return on that relative to 0:17:47.560 --> 0:17:49.800 taxing labor. And the moment we tax labor pretty heavily. 0:17:49.840 --> 0:17:51.440 So if you work, you know, even if you're on 0:17:51.440 --> 0:17:53.240 a very high income, you know people who are you 0:17:53.280 --> 0:17:55.399 know a quarter of people who are earning above a 0:17:55.480 --> 0:17:57.919 hundred thousand pounds are paying sort of what you'd expect 0:17:57.920 --> 0:18:00.320 that headline rate to look like, which is, you don't 0:18:00.320 --> 0:18:02.399 want to get to two million pounds about forty seven percent. 0:18:02.680 --> 0:18:04.840 But even when you get to hundred and fifty thousand 0:18:04.840 --> 0:18:07.720 and you hit that rate, it's still the case that 0:18:07.840 --> 0:18:09.480 you've got most of your income tax at a lower 0:18:09.560 --> 0:18:11.440 rate than that. And so you know, the average rate 0:18:11.560 --> 0:18:13.280 that you're paying is below that, but there's there's a 0:18:13.359 --> 0:18:15.600 chunk of people who are actually paying those rates. But 0:18:15.640 --> 0:18:17.000 there are a lot of people who are on those 0:18:17.080 --> 0:18:20.560 very high incomes who are paying actually their effective tax 0:18:20.640 --> 0:18:22.760 rate is much lower. And that's because the form in 0:18:22.760 --> 0:18:24.080 which they take their income. So it could be that 0:18:24.080 --> 0:18:26.080 they get money is dividends, and dividends attacked at lower 0:18:26.160 --> 0:18:28.600 rates than than labor income. It could be that they 0:18:28.960 --> 0:18:31.080 own properties and they get money from renting them out 0:18:31.280 --> 0:18:33.359 that's taxed at a lower rate. And also it doesn't 0:18:33.440 --> 0:18:36.000 isn't covered by the National Insurance or Health and Social 0:18:36.040 --> 0:18:39.200 care levy that as it was, So there are these 0:18:39.280 --> 0:18:41.119 kinds of other forms you can take it, and then 0:18:41.160 --> 0:18:43.000 you as we've just been discussed in capital gains as 0:18:43.040 --> 0:18:45.520 tax at much lower rate. And so people who get 0:18:45.560 --> 0:18:49.639 income or gains. Who get returns from capital from owning 0:18:49.640 --> 0:18:51.760 assets are actually taxed a much lower rates and people 0:18:51.760 --> 0:18:53.600 who are taxed on labor income. And that means that 0:18:53.640 --> 0:18:55.520 it's not just about the difference between rich and poor, 0:18:55.640 --> 0:18:58.520 although it is the case that money from capital is 0:18:59.240 --> 0:19:01.159