Can or Should We Choose How Much Tax We Pay?

I got into an argumentative discussion on the IOD Linked In discussion group recently with a tax adviser/accountant who asserted that 'We have the right to choose how much tax we pay.'

Firstly, I was pretty miffed at the use of the royal 'We' as I certainly do not choose how much tax I pay. Secondly, there was not just an implication but a direct argument in the discussion that people have the right to not pay the correct amount of tax they owe. If they want to not pay it, they can. He claimed also that this is perfectly legal under the statutes governing tax.

The Royal 'We'

What the chap meant was that the 'We' he was referring too were those rich enough to afford the fees and special mechanisms in the murky world of 'Tax Mitigation' (heaven forbid we call it 'Avoidance'). As he was using the Linked In IOD Forum he was referring to the 'We' as those who are members of the IOD. This meant me.

He was wrong there on two counts - 1) I cannot afford such fees and suspect mechanisms and 2) I would not want to participate in any of them.

Of course, as much as the next person, I don't want to have to pay all the tax asked of me. I will use up as many allowances as I can like ISA, capital gains, some dividends from my company etc in but I am very opposed to going beyond the statutory allowances - I believe in paying my way fairly. If I don't like it, and I am opposed to the new taxes proposed, I will lobby and vote against it whenever I have the opportunity, but I will pay it if I have to.

A gaggle of directors I overheard this morning were discussing how they could take their earnings above £150k as 'fees' into limited companies thereby enabling them to not draw a salary and pay themselves in dividends which are taxed a great deal less and neither the company nor the 'contractor' pays National Insurance. They were worried about the VAT implications - I would be more worried about explaining to HMRC what their company does and why they only have one client. Of course, there would be an added benefit to the company, as they would not have troublesome Industrial Tribunals if they just terminated their contracts and wouldn't have to pay a bean in any compensation or redundancy money, nor any pension contributions or fringe benefits. Hey, why don't we all do it!?

The royal 'We' here, of course, would get found out by HMRC in an instant. From my perspective, and I have a limited company, I contract to several clients at once and not one occupies my time fully. The specific legislation on IR35, as it is known, is an area fraught with danger. It effectively says any contractor must form a legal limited company and take fees but they should show that over time they are not just working for one client - otherwise it is deemed to be a 'scam' to avoid paying the taxes associated with being an employee. Most contractors will show, even if they have a few long contracts, that over time they work with several different companies on different projects.

The royal 'We' might have a bit of difficulty on all that. What they hadn't considered would be what happened to their stock options and other goodies but as usual they were just focusing on their current pocket.

Dividends vs Salary

It was always a neat scam, even as a contractor, to pay yourself a small salary and then take whacking great dividends and save all the associated employee taxes. Naturally, HMRC became wise to that, as usually the dividends spookily equalled the amount of salary the person would have normally earned and, moreover, seemed to be paid monthly like clockwork, exactly when the client paid their invoice. In fairness, some contractors who get paid agency or commission fees based on the sales they generate can easily justify their small salary and high dividends - they cannot predict when they are going to earn their next cheque. Even so, HMRC is pretty dubious and sceptical on the whole thing and err on the side of stopping the practice even if it is justified.

You see, the ideas my director friends had were the obvious ones that the tax adviser would have paid only a single charge for telling them as there is no ongoing knowledge to impart. What the tax adviser would be doing for the royal, and very royal, 'We' would be to tell about how to pay no tax on very big amounts of money.

The Big Scams

The richer you are, the less tax you pay. That's the simple rule of thumb. It's convenient to marry someone who might be able to claim they are a non-domiciled person. But for good effect, it's best to own a 'primary' residence outside the UK and in a place where there are pretty low personal taxes. Places favoured by the rich are Monaco, the Channel Islands, Isle of Man or Switzerland. To boot, they are all nice places - no riff raff, generally speaking, and one has the advantage of having a decent football team. Having played cricket on Jersey, I can recommend it highly and we even bumped into 'Charlie Hungerford' from Bergerac fame once and gave him an exploding cigar. I digress.

The very rich basically siphon all their money into these domains. But this is for the F1 racing drivers, popstars and big swinging whatevers from business like Stelios or Philip Green. When you have such a set up, you can choose how much tax you can pay, alright. In the case of Philip Green he paid himself a single dividend of £1.2 billion and did not pay a penny of UK tax on any of it. The money wasn't really even earned by his company, it was a bank loan. By paying it to his wife, who was a qualified non-dom, he made doubly sure no-one could chase him. All he makes sure of is that he doesn't spend more than 90 days in the UK in any single tax year - although the days on which he travels either there or back or through, do not count. If you are rich enough, that is not an issue. Mind you, if you own your own budget airline, the last thing you want to do is go on it even if it flies to Nice. It's not exactly a company perk then, is it?

Some years ago, the fashion was to hold the shares in your company in an offshore Trust. These were lovely and expensive to set up and 'administer'. Famously, Lords Sainsbury and Levy operated these for at least a while, which meant that they took zero earnings in the UK but lived off the dividends generated by the shares in the offshore Trust which were miraculously tax free. I am, not sure if that particular avenue has been closed down now, but it was a belter.

Of course, the wise thing to do if you are mega-rich is to register your company offshore. Not the one that generates all the profit mind you - leave that on British soil, just make sure that the entity is owned by another and charges it a management charge exactly equal to the profits made or a few quid less to be on the safe side. Many of these rich fellows don't take much in the way of salary. Between expenses and dividends they are well cared for and most of these will be taken outside of the country and wrapped up as capital gains, carry forwards and other complex 'cheats' to make it look as though they earn nothing taxable but are actually taking millions or billions.

This is the royal 'We' that adviser was on about. Of course, there are some mini-scams for the not so filthy rich which helps make sure that very little of the tax Brown and Darling are aiming to get their hands on will actually be collected and thanks to giving everyone a year's heads up, there is plenty of time to pay the advisers for their advice and get round it. As always, it will be those just getting enough to qualify for the new tax but not enough to afford the advice and complicated instruments of 'avoidance' who will really get hit. Already, HMRC has indicated it will hammer down on 'salary sacrifice' which is the idea of giving up the portion of your salary above £150k and taking it as an employer's contribution to your pension. It means it can't be spent yet but at least you get your tax back. Not anymore - the proposal is a tapering tax which starts at 20% of the employer's contribution for a £150k earner and rises to 30% for those earning above £180k.

HMRC has already indicated it will be watching out for those earning around these thresholds who suddenly elect to 'sacrifice' part of their salary or bonus and take is as a employer pension contribution. But then again, they have a year to sort all this out.

Sympathy

It is those who earn around these threshold levels who I actually feel sorry for and it is where Darling is aiming. Just as the majority of law abiding citizens, who do not cause accidents or kill people on the roads, are the ones targeted by police with speed cameras as they are the ones who will pay however much they may not like it. The people who kill or have accidents are usually the ones who don't bother paying or can afford fancy lawyers to get them off on technicalities. The same is true of tax. Morally, it is corrupt.

The Government has blown a lot of money in the last year on this whole financial crisis and we are going to be paying for it for an awful long time - out until 2032 is the estimate on some £1.3 trillion of borrowing. The one thing you can be very sure of is that these will not be the only unpopular taxes introduced. You can also be sure that it will not just be the rich who get fleeced - ordinary, middle grounders and lower paid people will be disproportionately targeted through things like fuel tax or alcohol duty and will collectively pay more. Why? Because we will pay as we have no choice.

Tax 'Mitigation' or 'Avoidance' is one of the luxuries of being rich.

Small Businesses - What The Budget Meant

I think most people would agree that the budget speech made by Alistair Darling this week was pretty depressing. It is hard to dress up what is a very serious situation that Britain is in but I cannot help feeling this was an opportunity missed to focus on some key areas that matter to small businesses.

It's a very important point. Small businesses employ over 13 million people and constitute around 95% of all companies in Britain. We are, in reality, the engine room of the UK economy as by proportion of our size, we pay more tax into the system than any other part. However, the figures for small companies failing right now are staggering - literally hundreds per week fail.

Most small businesses are failing on two counts - a lack of new orders and a lack of cash. It is very difficult in a downturn for the Government to conjure up more orders, although there were some things they could have done, but they can give access to more cash. After all they have given £ billions of it to the banking sector which had caused much of the problems.

That said - here are some highlights of the budget and business generally worth noting from this week.

The Budget Highlights

- Corporation Tax

The first big area is that any company making losses will have the ability to claim more of the tax back that they have paid over the last 3 years. This is an important consideration when filing this year's accounts and how much loss has been accrued.

- Capital Allowance

The main business capital allowance has now risen from 20% to 40%. This is a big concession for those businesses who have invested in machinery or new technology and is also a good incentive to think about capital vs. overheads.

- Strategic Investment

£750 million has been ear-marked for strategic investments in emerging technologies. It is well worth getting up to speed on this as your business may qualify particularly if you are working in the arena of more carbon or environmental friendly technology.

- Credit Insurance

Up to £5 billion of extra cash has been committed to cover trade credit for those businesses who have experienced a reduction in the level of cover. I think there is an opportunity missed here as we have seen from the Enterprise Loan Guarantee scheme that banks have abused the system and I think credit insurers will also. I think insurers will use this extra cover to merely cover their existing book more. The issue for many companies is that they are having to find new clients and they will need new cover in order to deal with them and this has not been forthcoming. Once again I think this is putting money into the wrong area and all it is doing is maintaining existing sales.

- Safeguarding Jobs

I have to admit I thought this was just a soundbite with not a scrap of credible detail to tell us how 500,000 jobs will be saved. I think most small businesses would like to know where they can apply today in order to avoid redundancies they may be making but somehow I don't think either the Chancellor or PM has thought this through, but it was carefully designed to sound as if they were doing something.

- Work Experience

Some £250 million is set aside to help people in certain industries to get job experience. Precious little detail has been given but this could be of real importance in the coming months as this can help provide business with a helping hand on staff levels without having to hire or pay contractors.

- Statutory Redundancy Payments

The minimum payment per week of service is now £380, up from £350, and this is an important factor when costing out job cuts. Also, the maximum pay out is now moved up from £10,500 to £11,400. Unions had fought to get this higher as redundancy is actually a very cheap option in the current business climate and not enough thought is going into the process by managers.

- Environmental Initiatives

If you are a low carbon industry, then there is good news. The Government has pledged a further £1 billion to be invested in low carbon businesses. A further £405 million is available to support low carbon manufacturers and if you are into offshore wind projects, you have hit the jackpot as £525 million will be spent on them.

An interesting little extra is that £525 million will be spent on energy efficient projects in homes, firms and public buildings. For all builders reading this blog, I would get up to speed on this as this could be a lucrative new business opportunity in the coming year.

- Childcare For Workers

Many firms encounter the difficulty of childcare for employees. While the new initiative to compensate grandparents in their pension for caring for grandchildren does not seem much, it actually may filter down. Hopefully more grandparents will get involved as their sacrifice of time may be compensated and this may take the strain financially off some workers who have to pay significant sums in order to provide nanny services. It may also ease pressure on working hours as grandparents tend to be more flexible. I have real hope that this may help.

- Government Savings

Tax loopholes are closing and there is an aim to raise £1 billion via this. For those firms and individuals who have been using such loopholes, I dare say this may up your fees to your clever accountants and lawyers to find the next 'loophole'. If the Government hits anywhere near this figure I will be very surprised.

Public spending is coming down in 2011 from 1.1% to 0.7%. The figure seems innocuous but if you have a business depending on this spend, then find something new to do.

£9 billion in efficiencies are planned - I assume this will mean clearing out dross in vast new departments like Dept. of Business Secretary and the Office of the Deputy Prime Minister but how the stupid policies of increasing bureaucracy and Government via Assemblies have backfired just as everyone thought they would. So much money is absorbed by all this, it is a tragedy that we have to go back and save it. If only they would completely overhaul public sector expenses then I am sure we could save a ton more.

- Housing

Some good news for the building industry as more stopped housing projects will be restarted as £500 million will be ploughed into these but it does include £100 million for local authorities to build energy efficient homes. For those with businesses around armed forces camps, £50 million has been specifically set aside to upgrades of their homes.

- Property

Lots of mixed messages here on holiday or second homes and the detail needs to be gone through, but for many who had bought second homes and hoped to get some rental income then they are going to be sadly disappointed about how that will get treated for tax. Also, there is more of a potential hit when selling. What this does on the buy-to-let side needs to be teased out. For many who bought their second homes and planning the financials based on existing legislation, this will be a major blow and some would argue a very unfair one. I can see a need for sound advice from agents and accountants here and for all second property owners I would go back and look at the Terms and Conditions from your advisers at the time of purchase particularly if you were lured in by some 'glossy' adverts and sales speak offering 'guaranteed returns'. The industry, sadly, is not noted for it.

- Duty Increases

Travel is once again targeted with an increase on fuel duty of 2p per litre from September and I have to say this is once again a very hard tax. The cost of travel is heavy enough as it is and public transport is so overly expensive in Britain that people have no choice but to use cars. This is a big cost to individuals and to business as this cost will be passed on to customers. Via staff mileage allowances or cost of delivery, costs rise and have to be absorbed or passed on. This really is a stupid extra cost at this time as it will penalise business and individuals.

Naturally the perennial duty rises on alcohol and tobacco are high. I got lost as to why this is done - either this is a problem area in society, draining the NHS, or it is a good thing, either way the tax is neither punitive nor helpful.

- The Car Industry

Good news at last for the beleaguered car makers and their dealers who have suffered a greater than 30% drop in sales. The Government announced a £2,000 scrappage scheme for cars over 10 years old to be given as a credit against a new car. Already 8 out of 10 leading car makers have committed to the scheme which extends only to the first 300,000 cars bought under the scheme. The caveat is that the industry has to provide £1,000 of the £2,000. I cannot help feeling that again an opportunity has been missed as scrappage has worked well on the continent to support sales - dealer discounts are already heavy so will we end up paying more because the dealers will withdraw the discounts to favour this scheme? I wonder.

- Personal Tax

For those earning above £100,000 a year, their personal allowance will be halved while those earning above £150,000 a year will have their allowance removed and see all earnings above that taxed at 50% - together with NI changes this constitutes over 60% tax for some earners. It will mean that firms may well look at alternative ways of rewarding their top earners with greater dividends offered or stock options or deferred bonuses. There has been much howling about this as 'manifesto reneging' and even Tony Blair believes it is folly. Some are concerned it will cause a new drain on top talent. Who knows, but it is something that I think all companies will get 'creative' about and I don't think it will raise as much tax as Ministers think as those around the various marks will simply take the offending portion as something new.

A nasty piece of work is the scrapping of the top rate tax relief on pension contributions. I would suspect that most companies who care about this will simply put it as an employer contribution instead and take it off the salary bill. I just think it sends all the wrong messages about savings.

With this, at least the ISA limit has gone up for personal annual tax free savings to £10,200 (for over 50s this year and everyone else next year - why wait?). For the clever minded there are OIC schemes which allow you to use Capital Gains allowances in the same year to maximise tax free investment. Get good advice from your IFA on all this as my wife (who is an IFA) has just done the same for me.

There is also going to be a reform on tax on profits earned abroad - watch out for this one.

I recently got into an argument on the Linked In IOD Forum with an accountant who asserted that we should 'Choose how much tax we pay' and the statute allows this. He defended the likes of Philip Green saying he had done nothing against the law.

That's as maybe but I think that those wealthy people who deliberately go out to avoid paying a fair tax on what they earn are morally corrupt. So much so, I have opted out of that discussion group and it's the last reason I needed to opt out of the IOD which seems to be a knocking shop for such people.

That said I still believe that people should use their allowances and the tax system allows you to be sensible about your future. So those high earners earning around the £100,000 and £150,000 thresholds can take a 'salary sacrifice' and put the offending part of their salary into their pensions. Of course, that means it cannot be spent but it is about time that we had a good reason to save for retirement. Also, this needs to be clarified as new tax rules may frown on such an option - which I cannot see any wrong in doing.

Another scheme I have seen is deliberate tax avoidance which is setting up a limited company and taking the earnings as dividends and so tax is lower and using non-earning spouses and children's allowances. I think, again, this is wrong but according to the IOD accountant, perfectly legal.

Entrepreneurs

There has been much uproar that this was budget against entrepreneurs, in that it discourages people from taking risks. I don't see the logic in this - The Sunday Times Rich List has JK Rowling worth over £400 million yet she pays full tax and lives in Scotland. For the person willing to get up and work hard on their ideas, you will still be rich at the end of it. Maybe a bit less so, but rich.

Here's my logic. An entrepreneur in the UK starts here not initially to get rich but to make an idea work. For that they need market conditions, customers, access to markets and an environment ripe for their product or services' success. If they went to Cyprus to make that happen I would assert that they have less chance of success. If they went to the US, probably the same unless you have experience of the US markets. The simple fact is, entrepreneurs use the markets they are in to create their success - no market, no success.

Peter Hargreaves, the Financial Advice magnate, says he is going to Monaco or the Isle of Man - fine, go there. To get that rich on the back of financial advice then he probably gave interesting advice and I wonder if the majority of his clients are as rich as him to be able to make the same choice. But he has made his millions and he could not have made it without his customers who are here in the UK. No market, no success. So what does he want? To live in the Isle of Man and then start up another high earning business? He couldn't do it without having his customers at his doorstep, unless he was creative enough to know how to do it - and then he wouldn't be bleating about it.

So it seems that these people want more than being rich despite the fact it is normal, honest, tax paying people like you and I who have made them rich by buying their products and services. Perhaps if they had told us that before they touched us up for our money we would not have bought from them. Stelios is a prime example of this, always bemoaning 'Fat Cats' like Barclaycard who took a percentage of his take or the airport charging for things. He made millions and declares himself non-dom to avoid paying tax. So who exactly is the fat cat?

It is infuriating to think that such rich people think the country owes them more than they deserve and the customers they sell to. Makes you wonder why we buy their products with that kind of disdainful attitude. Remember that the next time you want a pension or walk into an Arkadia store like TopShop.

Grim Faces

Quite what Gordon Brown was grinning about and patting Alistair Darling on the shoulder for after perhaps one of the most grim budget speeches since 1945 in terms of the country’s finances is beyond most people. At least our finances back in 1945 were grim for good reason – we had just saved the world by fighting a real war.

Yesterday we heard how Britain was going to try and dig itself out another, far more serious financial situation caused by greed and incompetence to a degree not encountered before in the globe’s history.

The surprising thing was that it seemed to amuse Brown greatly. Personally, I would be holding my head in shame.

The budget was undermined by an inability to add up. Less than a few months ago, the PM and his sidekick were telling us confidently that the economy would not shrink by a certain amount and therefore borrowing would not need to be so high. Yesterday we heard that he and Darling had got the numbers wrong – the economy would decline by 3.5% this year before picking up by 1.25% next year and because of lower tax revenues due to higher unemployment, the borrowing would be significantly higher than anticipated before. Even before he had finished saying it, the IMF roundly contradicted him saying the economy would decline by over 4% this year and a further 0.4% next year and so borrowing requirements would be higher than he had predicted in his speech. The IMF, to be fair, has called the UK numbers far more accurately than our own Ministers.

It was ‘Wishful Thinking’ again from Darling who looked increasingly alarmed about the numbers as he mentioned them, as if by actually articulating them it was the first time he had noticed quite how disastrous our position actually is. The problem with wishful thinking, as we know in business, is that inevitably it leads to assumptions upon which wrong decisions are made. For us, it will be the amount of future tax we all pay – it’s that fundamental.

Class Wars

One of the least unexpected features of the speech was that the highest rate of tax has now been set at 50% on earnings above £150,000 which means, with the removal of the personal allowance for earnings above £100,000, that the effective top rate of tax is 60%. Labour has reverted back to the party of taxing higher earners but not the super-rich who can afford to evade this. It was, of course, a tactical move designed to elicit some sympathy from the public.

However, the greater amount of tax would be raised from the additional duties on tobacco, alcohol and fuel. A great proportion of the population consume these products and probably as much as any rich person, which means that lower paid people are getting taxed disproportionately more compared to their earnings. This has been a tactic of this Government since its birth and once again, the soundbite was designed to divert attention from the real menace of the budget – we will all pay more tax.

As unemployment topped 2.1m yesterday and the burden on the welfare state rose again, it is very clear that our situation is getting far worse. In short order, Britain will be borrowing around £1.4 trillion or over 70% of a falling GDP – an additional liability of £23,000 per head of population in Britain, which of course excludes non-domiciles. Whether we believe Darling or the IMF, we are pretty much up the creek without a paddle.

‘Grow Out of a Recession, Not Cut’

Darling’s little snippet may well be his epitaph. How much longer he has to endure the pain of being Chancellor might be mercifully short if he continues to bungle but if he’s unlucky he might have to hang on until the next election and ensure his team loses – a subject on which he is making good progress. Surely, he cannot be enjoying being made to look such an idiot each day.

Meanwhile, the Bank of England Monetary Policy are encouraged that there are signs that the policy of putting new money into the economy is working, the £75bn set aside for buying Gilts is apparently showing signs of effect. The good news is that there will not be any shortage of Gilts to buy as over £225bn of them will be sold in the near future, a very grim reminder of the additional debt the country is taking on. Last month saw the first failure in the Gilt auctions since 1995 and for just a second there it seemed that the whole darn policy had hit a brick wall. External investors had basically shunned us, fearing that Britain did not have the ability to service that debt and there were fears of a down-grading in our credit status globally. That drama has yet to fully unfold and over the course of the next few months, Mervyn King and Gordon Brown will need to attend Tony Blair’s Faith Tour to get the strength to pray enough that the auctions do not fail again.

While the theme was to borrow more to invest and we got a few snippets of how that may be in terms of increases in bad debt insurance, help for the unemployed young and a few other things, in fact, the majority of the budget was how efficiencies were to be achieved and taxes would rise. Wales alone is set to see over £400m chopped off its budget and there were concerns that Health and Education would suffer. Perhaps the Assembly Politicians should have thought of all this before creating so many Politicians on fat salaries, expense accounts and rock solid pensions in their swanky new building beforehand but at least if they scrapped the Assembly now we could salvage some savings for the future. Policies at the start of the Labour Terms are now coming back to haunt them and this is one – layers of Government with no power clogging decision making channels and creating new talking shops in new offices, draining valuable resources - was one of the worst.

There are many, many ways in which this country could save cost and divert the money into better spend and this should have been the theme. Instead, it’s all about draining resources on key things in favour of propping up a failed and flawed bank system. Investment in the right areas should be the priority.

Britain Post 2010

While we are being focused on the here and now by the Government, our future looks very bleak. There is no point in toiling hard and trying to get salary increases only to see most of it absorbed in new taxes while the relief on pension savings is being scrapped at the higher end so we cannot provide enough for our retirement.

Tax bills will rise dramatically and what we heard yesterday was only the start of what will be many calls on us for more money. They say two things are certain in life, death and taxes. Yesterday was the first step of the biggest certainty we will all face – taxes will rise dramatically over the next 20 years regardless of who is in Government. Just as the last Labour regime left the country in a dreadful state that took the policies of Margaret Thatcher to solve, it will be someone else’s problem for the future and it will take some solving.

Of course, one of the lasting Blair legacies was to be the 2012 Olympics. I love the Olympics but I have always had a problem with the obsession by countries of holding them which seems to attract politicians like moths to a light. This Olympics now looks as if it will be more of a millstone than a legacy and already there are rumours of cuts in venues as budgets continue to overrun.

As with Assemblies, legacies are to be earned not paid for and the Olympics is in severe danger of becoming one of another Labour’s major follies.

Taxing Conundrum

Well the budget speech had no real surprises for us but Mr. Darling has been surprised by the fact that borrowing has been higher than he predicted and the recession deeper. Fair play, though, he's only running the country's finances.

The only minor shock was the last minute hike in the top rate of tax for those earning above £150,000 per annum to 50%. Of course, anyone earning between £150,000 and say £250,000 will be grinding their teeth and spitting, particularly if they take that as salary or bonus. For those earning above that level, we are into the stratosphere where compensation can come in varying forms from capital gains to dividends or some other contrivance.

In fact, of the 50+ billionaires who are supposed to make their living in the UK, they pay less tax proportionately than those on the average wage.

You see the richer you are, the more creative you can become. And for those in the super-rich bracket, well they know every trick in the book. Sir, and yes he was knighted by this Government, Philip Green made sure he did not pay a bean in tax on a single dividend of £1.2bn that his company did not earn. The dividend was paid by a bank loan and went to his wife who is apparently an non-domicile. Like many hedge fund, private equity and top end traders in the City, Green has the facility to evade paying taxes in the UK - and he is mean-spirited enough to make sure he doesn't pay a penny, not just make sure he doesn't pay more than he has to.

The best part of all that is that this Labour Government have not just allowed this to happen, they have openly supported it and enabled these super-rich people to avoid tax by making our top end system more attractive. Instead of promoting funding for new business ventures, innovation, creativity, entrepreneurship and backing bright ideas, they have allowed billions to be created off buying, revamping and reselling existing businesses and shorting stock prices. Britain is way behind its rivals in terms of injecting capital into good ideas and many of the so called 'Venture Capital' companies plough their money into juicy deals for fast-buck turnarounds rather than back creative new businesses.

What this new hike in tax will do is call into question the raft of high earners who actually have to go to work for their living, selling things, building businesses and creating employment for others. They will be the ones who stick around here not able to afford fancy Trusts like the Labour golden boys and so pay their taxes. So when the opportunity arises to work abroad for a few years or even choose their country of domicile as anywhere else in Europe, like Switzerland, then they will do so.

The whole borrowing and tax situation is only going to get worse. As unemployment moves toward a peak, the strain on the welfare state gets higher and tax revenues decrease - so the majority of us will pay for it. Tax on fuel, because we have to drive to work whereas it is nothing to the super-rich means that once again working Britons bear the brunt of all the tax bill now and in the future.

Why didn't we see 'windfall taxes' for hedge funds or private equity? Why didn't we see a higher rates of tax on future profits on banks as they should pay back the money we are stumping up ahead of us? Why don't we see all senior banking executives having capped bonuses for the future with higher rates of tax applied? Why don't we see scaled Capital Gains Tax for businesses that proportionately rewards owners who have nurtured their businesses over many years vs. those who buy, asset strip and sell in short order?

It's because they won't pay. Tax the hedge funds and they will all register their headquarters outside of the UK, same with private equity. We need a wholesale change in legislation on companies and where they pay their tax and any individual working for them before coming to the rest of us for the price of this mess created by a bunch of ministers who cannot even get the numbers right from day to day.

Once again, this is a budget on the mass of people who regularly cough up and cannot afford to leave the country. The super-rich once again get away without paying. There was a time when Labour represented the party of social equality - but, with their former leader's head so far in the trough of riches, it's pretty obvious that's all in the past.

As a final note, I heard Tony McNulty on the radio today 'defending' himself on his expenses row. He stands by the fact it's all in the rule book. It reminded me of the old Peter Sellars film, 'I'm alright, Jack' - he has got his head so far in the feeding trough he cannot see that his job is no different from the average person who has to commute to London. He claimed £60,000 on a second home that wasn't even his and is less than 13 miles from Westminster. The rule book doesn't say you have to be a greedy, money-stealing swine with no conscience.

But that's what it takes to be a Labour Minister these days - that and skin thicker than a rhino's hide.

Maximising Business In The Recession

Today is Budget Day and I must admit, I would not like to be in Alistair Darling's shoes. On a day when debt rose faster than anticipated and we now owe over half of our GDP, he will be proposing that we raise spending and borrowing again while swooping in on our savings by likely removing the tax relief on pension contributions for those earning over £40,000 a year. It's a budget all about the here and now while deferring all the bad news to some years down the line.

It will be a critical day for businesses up and down the land. The failure of initiatives like the Enterprise Loan Guarantee Scheme to get a semblance of normality into credit has hit small businesses hard and unemployment rose sharply again last month.

It's hard to call but it seems to feel like we are now at the deepest point of this recession and it's likely most businesses are feeling the hardest pressure now. Many businesses will be finding sales static or dropping, cash tight, stock an issue and costs always pressuring. It is a time when cost cutting comes to the fore and that invariably means people going.

Surviving and Thriving

Recessions are mean beasts and are no respecters of heritage or past glories - look at MFI, Woolies and Viyella. It has been a vicious and fast-acting recession as credit has also dried up in the after math of the credit crunch.

However, now is the time of potential new opportunities and a chance to set up your business for a new future. It will require bold thinking, fundamental changes and even some heartache but now is the time to radically get to the core of your business and make changes to make sure the future is better.

There are opportunities out there. Cash may be tight but companies which have plans, a sound strategy and opportunities in their business can gain access to cash - it will be all about demonstrating these ideas, how your business will change to grasp them, how management is capable of embracing the changes and the opportunities, understanding what is required in terms of new resources in order to access the opportunities and if management is flexible to new ownership or structures.

For many businesses, their focus will be purely on cost savings and this will take the focus away from the opportunities. And this is often a symptom of short-sighted management who can manage upside but not the downside. It may mean some fundamental changes in key people, ownership, cash and debt structures and definitely in business focus. It is not for the faint-hearted.

As a gratuitous plug, this is what my business is all about. Call it business turnaround, call it business change, call it what you like, but Calx Europe is all about creating opportunities and tackling issues. It's all about results, so this is not consulting but practical, hands on management which delivers. It's about driving change in your business to unlock cash and profit, about finding new forms of finance or funding, finding new ownership, finding new management and talent, about marrying up new partnerships, about finding new opportunities and markets, about driving sales and people - it's about accelerating your business.

And in a recession, there is no time like the present.

Taxing Matters

I am currently reading Robert Peston's 'Who runs Britain?' and recommend it for anyone who wants to get bamboozled by the vagaries of the financial world and find the simple answers on how to get rich quick. One thing it does highlight is that some of the lowest earners in Britain pay more tax than most of the billionaires in this country and that's downright wrong.

However, Peston's blog today is an example of how silly he can be. He points out that hidden in the detail of Alistair Darling's budget announcements may yet be another nail in the coffin of private pensions. The Chancellor is toying with the idea of withdrawing the top rate tax relief on pension payments and that is yet another good reason to think that Brown and Darling are very warped toward the super rich in their thinking compared to the everyday person who is trying to save for their retirement but cannot participate in the super, get-rich-quick schemes of the billionaires like Sir Philip Green who can pay themselves £1.2bn dividends that a) his company has not earned and b) that he does not pay not a single penny of tax on. Yet he gets knighted and adored and we pick up the tab - and he even bumped into me at the Dorchester car park and didn't say sorry. All that money and yet words are cheap......I digress.

Peston's point is that it is inequitable that if a 40% tax earner puts £5,000 into their pension, they get a relief of £2,000 whereas a lower level earner for the same contribution only gets £1,000 relief. He forgets the minor point is that the £5,000 has already been taxed at PAYE at the particular rates of the earners - so all the two people are doing is claiming whatever tax back they paid as an additional contribution to their pension. In this sense, it is not unequal in any way - it is just reclaiming the tax already paid.

They are making their contribution £5,000 gross or whatever tax each of them paid, that's all.

It is daft comments like this that fuel the wrong argument and allows Darling to cut such relief as some kind of 'levelling of the playing field' when he should be incentivising us all to set aside more of our earnings to fund our retirement and not tax us for doing so.

I understand that only approximately 4% of retirees receive two thirds or more of their pre-retirement earnings - most of those are in fact beneficaries of the final salary schemes where full service is achieved typically those involved in public service such as doctors, nurses, teachers, firemen and MPs. Given that the rest of us are typically scraping an income in retirement, regardless of our tax status, surely any incentive to promote contributions to retirement vehicles should be endorsed. We are not talking about tax loopholes or avoidance here (as in the super rich non-doms and private equity merchants so loved by Brown, Blair and Darling and lampooned by Peston in his book) we are talking only a rebate of tax already paid.

Peston's argument should not have been dissipated by factually inept suggestions but to focus on the fact this is yet another reason for people not to save for the future and create a huge legacy of future generations who cannot live off their savings as they are far too little.

What Peston should be focusing on is that this Government is once again trying to dress up the here and now as some kind of prosperous world and leave the bad news to some time later, just like the massive borrowing, unprecedented in post-war Britain, that we will all have to pay for.

What a shame such an influential writer blundered on such an obvious mistake and lost the plot. A bit like his book, really.