Monday, February 08, 2010

Tycoon saves tax by never visiting his family

Interesting story in The Guardian about the super-wealthy tycoon Guy Hands:

"Guy Hands, who moved from Kent to Guernsey last April in protest at higher income and capital gains tax rates, says he has "never visited" his school age children since he left the country. They have remained with his wife at their former family home in Kent and they now have to travel to Guernsey to see him.

Neither has he visited his mother and father – and wouldn't unless there was a family crisis: "I do not visit my parents in the United Kingdom and would not do so except in an emergency."


All to preserve his non-resident tax status. This is the kind of person that people in Britain have long been encouraged to look up to.

10 Comments:

Blogger Fred Fry said...

I think this says more about the UK than it does the person. After all, he is staying away because of a legitimate concern that the UK will declare him a UK resident for simply visiting his children.

Does every former UK resident face this possibility? No, only the rich do. I think that is the definition of discrimination.

6:49 am  
Anonymous James Baudain said...

@Fred

Not sure what you're trying to say here. Are you saying that requiring people to pay tax is a bad thing, causing break-up of families and generally corroding the basis of society? Mr Hands chooses to live in Guernsey ( a British territory) because by doing this he can avoid paying tax in the UK. He does this despite being paid phenomenal sums. His wife and family reside in Kent because Guernsey is, politely, not an exciting place and does not have the quality of education that is available in Britain. The idea that expecting rich people to pay tax in the UK is discriminatory is extraordinary, especially in these difficult times when the real UK economy is being wrecked by the excessive debt leveraging imposed on otherwise sound companies by people like . . well, Mr Hands.

Sounds to me like you're trying to excuse the politics of GREED.

And on the subject of discrimination, I think you'll find that TJN's Richard Murphy has argued that the non-dom rules in the UK are discriminatory on the basis of national origin: in favour of rich people. Are you also arguing against those rules?

James Baudain

10:52 am  
Blogger Fred Fry said...

James,
Re-read what I wrote.

Simply put, if a person is living in Guernsey, then that is where he is resident. It is common sense that visiting another country does not make you a resident of that country.

The discrimination claim is that the Government is discriminating against the wealthy because they are only pursuing people in such a fashion because the Government can profit from this harassment. It is revenue-based enforcement.

Is every UK citizen who is moving from the UK (I am told it is about 1,000 a week) not visiting the UK out of fear of being declared resident by Tax Authorities? No, because there is no fear of this happening to them as the reward is not big enough. That is the definition of discrimination, when many fit into the same pot, but only certain people in the pot are targeted.

Never did I suggest that rich people should not pay tax. However, if the UK manages to drive all the rich people out of the Kingdom, I think it is wrong for the UK to chase them overseas. Just like it is wrong for the US to tax it's citizens overseas on non-US income. (I say this having gone through the experience.)

As for non-doms, I am not for or against it as I do not live in the UK and I am not rich enough to pay the bribe that the UK is looking for to shelter me as a non-dom. Anyway, if I were that rich, I would not take advantage of the system.

I am looking for a house and taxes have come up. We have excluded moving out of Virginia to DC or Maryland mostly for State tax reasons. Within Virginia, we have avoided certain local communities due to high property taxes. So taxes do matter and they effect behavior. I am not planning to do anything illegal to limit my tax exposure. However, expand the result over thousands of people and you have other Governments also dealing with incredible debt and wondering why those with the income most able to help pay for their spending are the least likely to stick around.

1:24 pm  
Blogger Physiocrat said...

He is not a wealth creator, he is making his money from land deals. So with a substantial tax on the rental value of land, he would have to stop his games and turn his undoubted talents to the creation of actual wealth.

LVT picks up these income streams from land at their very source. They never fall into private hands in the first place and so cannot be spirited away to tax havens.

1:48 pm  
Blogger Physiocrat said...

Fred Fry - low property taxes generally mean rotten public services, I hope you don't mind potholes in the roads, etc.

In some areas, property values are high and a low rate of property tax will leave the local commune or whatever with enough to pay for good public services.

Other things being equal, low property taxes mean higher property prices, so you get nothing for nothing. That is how Ricardo's Law of Rent works. It is an iron law of economics. The market does its job. When lots of people make the same decision as you and opt for property in low tax areas, then supply and demand just drive up the prices and you end up paying the previous owner for, actually, nothing, instead of the local community body for public services.

Low taxes have made property prices sky high in the Channel Islands tax havens.

10:35 am  
Blogger djdrinkwater said...

Dear Fred Fry

Can you please try to write in something resembling understandable English. Are you a non-dom? Is that why you have lost the knack of straight-forward communication.

5:14 pm  
Blogger Fred Fry said...

"Can you please try to write in something resembling understandable English. Are you a non-dom?"
- English? Sorry, but I was taught American English. No, I am not a non-dom. Even without being fully taxed, the UK is still too expensive a place to live.

"low property taxes generally mean rotten public services, I hope you don't mind potholes in the roads, etc."
Sorry, but taxes collected are only one half of the equation. It is what the Government does with that money once they have it. This has been played out in the US by comparing the situations of California and Texas. All the taxes in California are higher but they go blow it on all sorts of mandated social programs. When a jurisdiction receives limited funds, its only option is to fill in the potholes. It is when they are flush with cash where they go forget their main purpose of existing.

"Low taxes have made property prices sky high in the Channel Islands tax havens."
Yes, but you can eventually pay off your mortgage. Would you rather have a low property tax bill when you retire or a high one...

4:49 am  
Blogger Fred Fry said...

One more thing; property taxes are based on the value of the property. Value is very often based on location. People have historically moved from city centers so that they can afford a better quality of live through lower mortgages and property taxes.

5:02 am  
Blogger Physiocrat said...

FredFry
Even without being fully taxed, the UK is still too expensive a place to live.

Yes, most young people find it difficult to get on the so-called housing ladder because property is not taxed enough so the selling price is sky high. They end up working for years paying interest on their mortages. Nearly everything in Britain seems expensive compared to high-tax Sweden, why that is I have no idea.

"low iproperty taxes generally mean rotten public services, I hope you don't mind potholes in the roads, etc."
Sorry, but taxes collected are only one half of the equation. It is what the Government does with that money once they have it. This has been played out in the US by comparing the situations of California and Texas. All the taxes in California are higher but they go blow it on all sorts of mandated social programs. When a jurisdiction receives limited funds, its only option is to fill in the potholes. It is when they are flush with cash where they go forget their main purpose of existing.


There is something missing here that you need to explain. Aren't elections meant to give the citizens an opportunity to vote out governments if they think they are wasting their taxes on worthless things? Perhaps someone wants them. Who? Why? Why are they wanted in Cal but not Tex? Why are social programmes needed at all? What's the matter with the place? I don't know, I am only asking, but if you make these assertions you need to explain the background.

"Low taxes have made property prices sky high in the Channel Islands tax havens."

Yes, but you can eventually pay off your mortgage. Would you rather have a low property tax bill when you retire or a high one...


That assumes you are earning enough to purchase a property in the first place. But all the differences are factored in to what you pay. That is how the market works. People have high tax bills when their retire anyway. The benefit of property taxes is that people don't dodge them. And on the whole, the rental value of the land is in fact the summation of all the benefits that are provided by the community at that location. Good infrastructure, low crime rates, good local schools and other public services, a pleasant environment - all of these things are reflected in the value of the land on which the property sits. So a tax on land values works on the basis of amount paid is proportion to benefits received. Any other way and property owners are getting a free ride. Which I am sure is something of which you would not approve.

Futhermore, taxes on anything other than land tend to drive up the cost of labour, thereby causing unemployment and the problems that need expensive and ineffective social programmes to alleviate. And without having earnings taxed for a lifetime, people would be in a position to continue to pay property taxes when they retire, just as they have to pay for clothes, food, electricity, etc.

11:58 am  
Blogger Physiocrat said...

One more thing; property taxes are based on the value of the property. Value is very often based on location. People have historically moved from city centers so that they can afford a better quality of live through lower mortgages and property taxes.

Of course property value is based on location. City centre locations are more valuable than edge-of-town locations because business function more effectively in city centres and people want to live their because of the amenities.If everyone really was fleeing from the city centre to escape property taxes then the value would fall. Obviously they are not.

In Britain, local taxes used to be determined by the local authority. It was often the case than identical properties were on two sides of a boundary, where on one side there was a low property tax and on the other, a high property tax. And guess what? On the low tax side, rents were higher than on the high tax side, the difference being precisely the amount of the tax. Money that one one side of the road was going to the local authority and paying for public services, was, on the low-tax side of the road ending up in the landlord's pocket and being spent on luxury yachts, racehorses or whatever. And the differences in property prices were equal to the capitalisation of the differences in rent. So what was the good of that?

12:07 pm  

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