As Tory peer Lord Fink admits taking “vanilla” steps to reduce his tax bill and insists “everyone” is at it, Channel 4 News unveils its own avoidance ice cream counter. Which flavour are you?
Ed Miliband and Lord Fink are at loggerheads. The Labour leader has accused the Tory peer of an “extraordinary U-turn” after Lord Fink appeared to drop his threat of legal action over tax avoidance claims.
After challenging Ed Miliband on Wednesday to repeat allegations of tax avoidance outside of parliamentary chamber, Lord Fink now concedes he did take mild “vanilla” steps to reduce his tax bill.
Speaking to The Evening Standard on Thursday the former Tory chairman said that the definition of tax avoidance had become so broad that “everyone does it”.
It marks a change of position from the day before, when Lord Fink had threatened to sue Ed Miliband if he repeated his claim that the Tory peer had been involved in “tax avoidance activities”, describing the Labour leader’s words as “untrue and defamatory.”
Although Mr Miliband stood by his words in the Commons about tax avoidance, he has now claimed that he had not been referring specifically to Lord Fink at prime minister’s question time, when he later referred to “dodgy donors”.
The Tory Peer retaliated saying “yesterday I challenged Ed Miliband to repeat the accusations he made in the Commons – that I used an HSBC bank account to avoid tax and that I was a ‘dodgy’ donor. He did not,” Lord Fink said in a statement, adding “This is a major climb-down by a man who is willing to smear without getting his facts straight.”
Meanwhile, Lord Fink’s quotes to the The Standard have opened another front in the debate. Lord Fink told the newspaper he “used the opportunity … To set up some simple family trusts” while on a posting in Switzerland between 1996 and 2000.
“Really what I was trying to do was, not like a living will, but to allocate a very small shareholdings to each of my children so they could pay deposits on houses in London one day after we returned,” he told the paper. “There was nothing complex, and they weren’t aggressive tax planning.”
“My family and I paid tax on all the dividends, both in Switzerland and the UK. They were done because my children were under 18 and I wanted them to have something to help them make their way in the wider world.”
Lord Fink’s suggestion that “everyone” does tax avoidance is, at best, puzzling. The Labour Party certainly took it as an own goal for the Tories who are eager to counter allegations of purely serving the interests of the rich.
James Meadway, an economist at the New Economics Foundation told Channel 4 News: “Politically, Lord Fink looks incredibly out of touch. Most people in full-time work will be on PAYE (Pay As You Earn) anyway and not have the flexibility of managing their tax affairs more widely than that.”
“You have to be in the position to employ several accountants to make tax avoidance it a worthwhile exercise. That point is usually when the amount you pay to an accountant saves more than the amount you can spend. Most of the country are simply not in that position.”
According to the Office of National Statistics, 11 per cent of UK households (not individuals) have savings of between £5,000 and £12,000.
The top rate of tax, payable by those on an income of £150,000 or more, is applicable to just 343,000 people out of 29.9 million taxpayers in the UK.
Meanwhile one Tory MP has told the Financial Times: “This is bad for us because it reinforces the perception that we only look out for the rich.”
Some say Lord Fink’s claim points to a wider truth about tax avoidance: that it operates on a spectrum of varying degrees that can inadvertently include the less well-off.
For example, buying duty free goods in an airport, taking out an ISA, or starting a pension fund counts is a tax-free way of operating. But that is vastly different from moving money into offshore bank account.
Where, then, should the lines be drawn?
In light of Lord Fink’s self-assessment as “vanilla” flavoured in his tax affairs, Channel 4 News unveiled its own ice cream counter. Which flavour are you?