Tax returns - who cares?

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In refusing to release his income tax details, UKIP’s leader in Wales said that he thought that the rush by other leaders to release theirs was a bit of ‘grandstanding’.  His refusal succeeds in making him look a little shady, but the comment is one of the few things he’s ever said with which I agree.  A question about whether the Prime Minister has gained from the tax avoidance benefits of an off-shore arrangement has been diverted into a competition between politicians to see who can appear to be the whitest.  And the original question has been completely lost in the process.

I’m not particularly interested in seeing politicians’ tax returns.  All they really tell us is that the individuals concerned have paid the correct amount of tax on the income that they’ve declared.  That should surprise no-one; it’s actually very difficult to avoid paying tax on income once it’s declared.  HMRC may have its faults, and they may sometimes struggle with the arithmetic, but the formula for calculating tax is straightforward, and once the income is properly declared, they will eventually get it right.  It strikes me as highly unlikely that any tax return published by any politician is ever going to get that wrong.

But the question asked of Cameron wasn’t whether he had paid tax on the income received; it was whether he’d ever benefited from a tax avoidance scheme.  Whilst it seems clear that he has paid all the tax due by him personally on the monies received, it remains the case that a company incorporated off-shore was able to avoid paying a penny in corporation tax for many years (even if, as the PM claims, that was never the prime objective of the off-shore arrangement).  It is probably reasonable to assume that not having to pay tax on company profits allows a company to accumulate profit at a faster rate than an equivalent company incorporated elsewhere, and therefore that the beneficiaries of the arrangement ultimately gain from the tax-free status.  That, I thought, was the original question, but it seems to have been lost in the rumpus over tax returns – a good indicator of why ‘hue and cry’ is not the best way of dealing with complex issues.

But let’s get back to the question of tax returns.  ‘Tax returns’ is being used as some sort of cypher to assess the openness and transparency of politicians (which is why, although he may have a good point, the refusal of UKIP’s Welsh leader to release his makes him look dodgy).  But what do we really need to know about politicians and money?  Fundamentally, it seems to me that there is only one relevant issue.  In essence, that is the source of their income and wealth, so that we can judge whether any decisions that they take are likely to be influenced by considerations of personal advantage, or to what extent, as a corollary, they are able to benefit personally from the rules that they change (or fail to change) whilst others are not.  If the rules on declarations of interest aren’t good enough to ensure that, then they need to be changed; tax returns don’t actually add much useful information.  And anyway, if someone is dishonest enough to make an incomplete declaration of interest, why would anyone expect that they’d then tell HMRC the truth?