Change the law on tax avoidance

Change the law on tax avoidance

The latest contretemps about Lord Ashcroft acting out the role of Conservative party honcho, while refusing to disclose whether he files taxes in the UK, raises a broader issue: why can any British national living abroad avoid taxes in this country?

Such "tax exile" status has come up with increasing frequency of late, in the wake of the 50% bracket reintroduced by Labour. Various people, including Michael Caine and Tracey Emin, have grumbled about their obligations, and threatened to go to live elsewhere.

Let us assume, for the sake of this argument, that Lord Ashcroft refuses to answer the question because he thinks he is within his rights to make British policy while avoiding British taxes: why does the law allow it?

Lord Ashcroft, for one, benefited from free British schooling (including the once-free higher education system); he honed his money-garnering skills living here; he continues to wield a British passport; and he gets to sit in the House of Lords, and vote on our legislation.

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Why should he avoid his tax obligations by going to Belize?

The American experience is quite different – and, with due respect, more sensible. I carry both American and British passports and, while I live happily in Dorset, I have to file taxes in the US and in Britain. I don't contest their right to insist on this. While they have not made me an honorary US Senator, I still enjoy benefits that flow from my American passport and I get to vote against the Republicans on a regular basis.

The American system takes account of other concerns. Any resident abroad who makes less than £55,000 (£110,000 for a couple) is exempt from US taxes. This means that someone who has saved in order to retire in reasonable comfort somewhere warmer and more affordable is protected from the US taxman.

If Lord Ashcroft were American, his millions would face a tax rate of 35% in the US. If his tax haven had a lower rate – say, 15% – he would pay 15% to the haven and the difference, the other 20%, to the US treasury.

It is, of course, perfectly possible for an American to avoid this obligation: he simply has to renounce his citizenship, thereby ending his entitlement to vote, or (in this assumed case) to sit in a legislative assembly.

For the Labour party, at least, there seems to be a simple solution to the perceived Ashcroft dilemma: rather than merely complain in the media, amend the law.

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