Sunday, April 03, 2011

The Uncomfortable Truth of Class War & Tax Evasion

David Miliband finds clever way to avoid paying tax he helped implement

Former British Foreign Secretary David Miliband has some 'splainin' to do.

In the year since Miliband's Labour party lost an election to David Cameron's Conservative Party of Britain he has moved from being a high-paid member of Britain's cabinet to finding clever ways to avoid paying the 50% top tax rate that the government he was a member of implemented.

As one of the fortunate strata of British society who earns more than 150,000 Pounds Sterling, Miliband would be paying a snowballing tax rate, wherein anyone earnign this amount has to pay an additional 50% of the 40% of their earnings they already pay in taxes.

However, it turns out that he doesn't.

Rather, Miliband has set up a company named "The Office of David Miliband Limited", which manages income that he earns through his work outside of Parliament. Instead of paying the 40% tax rate that he would otherwise pay on these funds (as well as the additional 50% of that figure), Miliband will instead pay a corporate tax rate of 20%.

This underscores a rather startling fact of life about many high-taxing politicians: they're more than willing to levy high taxes against other people, but they're frequently reluctant to pay.

It's true that corporations have many tricks to avoid paying taxes that private citizens often do not have at their disposal. As York University's Dr Neil Brooks explains, many corporations do this through shell companies established in the Cayman Islands.

While Miliband has stopped far short of setting up his shell company in the Cayman Islands, The Office of David Miliband Ltd, at least on its face, very much looks like a shell company.

Dr Brooks points out the costs to government of chasing down revenue otherwise lost through these shell companies, regardless of where they are registered. These costs should be on the minds of Canadians as they compare electoral platforms during the ongoing election.

After all, it isn't merely in Britain where politicians avoid paying taxes. In Canada, Michael Ignatieff's Liberal Party is campaigning on rescinding a promised corporate tax cut, even while former Liberal Prime Minister Paul Martin operates a steamship line which operates out of the aforementioned Cayman Islands in order to avoid paying the full share of taxes it would pay if it ran all of its operations in Canada.

That's the uncomrotable truth about class warfare and tax evasion: often those who push for the wealthy to pay the highest taxes are the first to look for ways to skip out on their own cheque when they join the wealthy elite they so eagerly attack.

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