‘High Net Worth?’ How to Fleece the Rest

So what’s all this about ‘high net worth’ people? This is how it works, courtesy of Guardian journalism.

If you are a wealthy person, tax-resident in the UK but with strong foreign links, then you are a ‘high net worth’ individual. The question for you is: do you want to share all your income with the UK tax authorities or not? Maybe you already have a Swiss bank account? Let’s say you do.

Where do you choose to live?

If you live in the UK, then open to you is the possibility – unique to the UK – of non-domicile (‘non-dom’) status. It is a colonial-era rule. If you or your father was born overseas, you can claim non-dom status and, if the UK tax authorities agree, for a certain fixed charge per annum need not declare – or pay any tax on – your overseas income.

If you live in Switzerland, then Swiss cantons offer special tax arrangements for high net worth individuals that allow for a highly favourable low rate. You will not be subject to any UK tax on your earnings outside of the UK but will nevertheless be able to spend up to six months a year there (and you need spend only three months a year in Switzerland).

You are a UK resident: do you choose non-dom status?

Say you do. You can now legally avoid declaring or paying any tax on your overseas earnings. Do you want to bring any of your Swiss funds into the UK?

If you do choose to bring untaxed overseas money into the UK, you have two options: offshore loans or cash. Offshore loans offer a legal way to get untaxed money into the UK: your Swiss account can put funds into an offshore company (which you control) that can lend funds to your UK business.

What about cash? This requires more ‘subtlety’. You are legally obliged to declare it when you come into the UK. If you do not declare it … well, it’s tax free.

If you choose not to bring any overseas earnings into the UK, then you do not need either to declare them or pay any UK taxes on them (even inheritance tax if you ‘make the right arrangements’).

If you do not choose non-dom status, do you want to declare all your income?

If so, then you will have to pay relevant taxes on all offshore income you declare. In these circumstances you may not need your Swiss bank account!

If you choose not to declare your offshore account and income, then you will not pay tax on it; but you are engaging in (illegal) tax evasion.

Comment

This is admittedly only scratching the surface of tax avoidance/evasion. But it shows one simple route to advantage accessible to the wealthy. It is undoubtedly a route blessed (or cursed) with less conspicuous parallel tracks.

From my own perspective, it is not be enough to cut off all these options for avoidance/evasion, although doing so would undoubtedly have intrinsic and extrinsic merit. First, it would right a manifest wrong; and second, it would open the way for further reforms. I advocate revolutionary change accomplished through ‘permanent reform’ (see other blogs), so this would be ‘one step’.

 

The notion of permanent reform recognizes that it will take a crisis of legitimation to split and weaken the UK’s governing oligarchy. Wealth buys the political power to resist reforms that call the wealthy to account in order to redistribute capital. Moreover resistance readily transmutes into repression of ‘dissent’ – unless, that is, the crisis of legitimation is deep enough. To draw on C Wright Mill’s The Power Elite, it will not be enough to dampen down ‘conspiracies’ emanating from within the governing oligarchy; it will also be necessary to deconstruct that ‘tacit understanding’ that binds them together to their collective advantage. Permanent reform aspires to step-by-step reforms accomplished via civil disobedience towards the legitimation crisis that is a precondition for substantive democracy and socialism.

This raises the issue once more of enduring class structures and relations lodged so deep beneath-the-surface of our day-to-day lives. Bring on the ‘action sociologists’.

 

 

 

 

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