Have just arrived in St Helier in Jersey after a short flight from Gatwick Airport in England. My arrival here takes my country & territories tally to 172.
Apart from the fresh westerly winds, this place epitomises one of the other prominent features of Britain, namely its system of legal tax avoidance for the rich.
Britain's tax system is replete with mechanisms designed to allow the rich to reduce their tax burden. In principle, the mechanisms are open to everyone, but in reality they can only be accessed if you have a lots of money. In practice, they are therefore only available for the rich.
The most common tax loopholes include Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EISs), charitable contributions as well as the use of trusts to reduce inheritance tax. In addition, there is the option to relocate a primary residence and business address to islands like Jersey, Isle of Man, BVI, and Guernsey. These islands, though British, have powers to set income tax levels independently of - and much lower than - the mainland.
But how do these tax loopholes specifically favour the rich and discriminate against the poor? After all, there is no law that says that they can only be exploited by certain classes of people. Let me explain.
Consider first VCTs and EISs. Respectively, these are government-approved incentive schemes, which, through granting tax relief, incentivise investments in green field (very high risk) and infrastructure (very low risk) projects. The tax relief is enormous: for every pound invested, 30 pence can be written off in income tax. For context, the means that you still break even if lose up to 30% on your investment. But here is the catch: only private banks and private asset management companies tend to offer VCTs and EISs and the minimum investment amount is usually around £10,000 or higher. No poor person can prudently invest such a large amount without seriously violating the first principle of investing, namely diversification.
Next, consider Britain's national sport: charity. In Britain, the tax burden can be significantly reduced by making sizeable contributions to charities. For this reason, everyone is obsessed with charities in Britain, to the point where criticising the system of charities is taboo. While everyone thus make charitable contributions, only the rich can do so in magnitudes that make a real dent in tax liabilities. The same is true for channelling funds into trusts in order to reduce inheritance tax. In both cases, making use of the schemes requires the investor to have sufficient money to able to set aside large sums and still live comfortably. Only rich people can do so, especially at a time of high cost of living.
Finally, consider the option to relocate to Jersey or one of the other Channel Islands in order to lower your tax burden. The tax savings can be eye watering. For example, the income tax rate in Jersey is only about 20% compared to 50% in mainland Britain, with addition savings on capital gains, etc. Once again, however, while legally there is no barrier that prevents anyone from moving to the Channel Islands, you will need to buy property in order to do so. And to quality for tax benefits, the property you buy has to cost a minimum of £1.4 million. How many ordinary Brits can afford that? None.
Britain is still in many, many ways a class-based society. It has all the outwards appearances of a representative democracy, but look closer and you will soon discover that Britain is designed to favour the rich, the privileged, the powerful. The pleb, meanwhile, is left to scramble to make ends meet. Naturally, a few rise from the gutter due to sheer hard work, determination, and talent, especially in London, but the system as a whole is still so deeply unfair and biased against the vast majority of the country's inhabitants that, as a nation, Britain continues to punch far below its own weight.
Or to put it another way, too many people in Britain never realise their true potential, because the basic investments in health and education required to do so never happen. They never happen because the funding is not there. And the funding is not there, because Britain's tax system is designed to serve the few, not the many.
The End
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