Do the rich get richer by donating to charity?

kabayiri

Leaving aside any 'scams' using bogus charities etc., what we have here is a handful of very rich individuals who think like this:

"Here I am, with more wealth and assets than you can shake a stick at, and my huge income keeps rolling in. I don't need it. So I will give it all to the RSPCA, and thus deny Mr Osborne the chance to get his hands on a single penny."

To defend the Government, I think they are saying that such people should still contribute to the national coffers to help pay for law & order, national defence, infrastructure projects, and other expenditure from which the taxpayer benefits.

This makes sense. But the trouble is that when you pay your dues to HMRC, there is no concept of paying only for the 'good' things [defence, security, infrastructure....], whilst avoiding paying for all the 'bad' things [huge waste, scroungers, Quangos....]

What confuses me, though, is why such rich people continue to live in UK!

I suspect this is part of the motivation behind the anger. As JulieQ points out, the very rich already pay a large share of the tax.

On BBC2 recently, the views of the rich towards taxation were represented by the ex-boss of one the mobile phone businesses (cant remember which).

He was an extremely wealthy guy; sold his business for hundreds of millions; and chooses to live here. He was very pro-charitable giving but very anti-government in the way they spend his tax.

This is an important point.

The masses amongst us, of which I am one, just pay our tax and have to accept it goes into the pot from which government spends.

The super rich don't seem too enamoured by this concept. They don't trust government to spend wisely, and are in effect taking control into their own hands.

Is this a power play between super rich/big business and the state?

chewmylegoff

Re: boarding schools, which it is of course correct that school fees are not a charitable donation and therefore do not attract tax relief, you can of course always make a large donation to the school, no strings attached, which will attract tax relief.

and if little johnny gets a scholarship and 90% off his fees, well that's just because he's gifted, isn't it.

chewmylegoff

kabayiri wrote: »

The super rich don't seem too enamoured by this concept. They don't trust government to spend wisely, and are in effect taking control into their own hands.

Is this a power play between super rich/big business and the state?

Just as a more general point, and not specifically around charitable giving, I do wonder what would happen if loaded people actually completed their own tax returns and structured their own affairs.

I expect quite a lot of tax avoidance is driven by the fact that rich person A cannot be bothered to look after his own affairs as he would rather be doing something else, so he hires tax adviser B to do it for him. in order to get as much money as possible tax adviser B spends hours minimising rich person A's tax bill in complex and obscure ways so that he can charge rich person A £££££, but not receive any complaints because tax saving > £££££.

In a lot of cases, I suspect rich person A doesn't really care all that much how much tax he pays as long as he's got so much money that he can buy eight ferraris and a pornstar.

kabayiri

Once you have a 'tax industry' with people earning a good living from it, is it no surprise they spend all their working time looking for new ways of minimising tax?

People often slag off Billy Bragg for his usage of such services.

Is Billy Bragg more likely to be good at understanding complex tax products or playing his guitar and singing out of tune?!

[I think you have the Ferrari/pornstar ratio slightly out though ]

julieq

shortchanged wrote: »

Yet the evidence is coming to light now that many of them are paying a smaller proportion of their income compared to the average tax payer.

What you have to ask yourself julieq, is that right?

Let's repeat the statistic.

1% of taxpayers are paying 25% of the total income tax take.

99% are therefore getting a hefty subsidy from the rich for services they use in the public sector. On top of that, the rich are providing investment in businesses the rest of us work in either directly or via one of the more common tax reliefs - on pension contributions which are invested in companies mostly - and they are providing very large amounts of money to support charities which benefit all of us, particularly the medical research charities.

So yes, I think that's right, but then I don't start from a position of moral indignation because some people are better off than me. The bottom 1% in the UK is better off than most of the world, not least because we have very generous welfare provision.

So where's your problem exactly?

kabayiri

julieq wrote: »

Let's repeat the statistic.

1% of taxpayers are paying 25% of the total income tax take.
...

And yet the rich have been getting consistently richer over the last few decades.

Clearly the current situation is working for them. There are now more millionaires in the world than ever before.

Massive consumerism has been behind much of this. People like Sir Philip Green rely on normal people on normal wages going into his shops and buying his products.

It's a balancing act then, isn't it? Let the lower eschelons keep enough of their money to buy the products which make the rich richer.

Wealthy philanthropists don't need tax breaks to support charity. Bill Gates and Warren Buffet are amongst the most generous in the world when it comes to charity, yet they don't have the same tax breaks.

shortchanged_2

julieq wrote: »

Let's repeat the statistic.

1% of taxpayers are paying 25% of the total income tax take.

99% are therefore getting a hefty subsidy from the rich for services they use in the public sector. On top of that, the rich are providing investment in businesses the rest of us work in either directly or via one of the more common tax reliefs - on pension contributions which are invested in companies mostly - and they are providing very large amounts of money to support charities which benefit all of us, particularly the medical research charities.

So yes, I think that's right, but then I don't start from a position of moral indignation because some people are better off than me. The bottom 1% in the UK is better off than most of the world, not least because we have very generous welfare provision.

So where's your problem exactly?

So for example someone earns £10,000,000 a year and pays a massive £1,000,000 a year in tax.

I see your point julieq, however for starters that would only be 10% of their income and fair enough they would only be left with a paltry £9,000,000. That's barely enough to live on these days.

When they pay the same amount of tax as a proportion of their income as the rest of the population then that is fair julieq. It's not about jealousy it's about fairness.

While there doesn't appear to be a huge number of multi millionaires doing this there are undoubtably some. http://www.telegraph.co.uk/news/politics/9206163/Treasury-figures-reveal-startling-tax-avoidance-by-super-wealthy.html

zagfles

julieq wrote: »

The top 1% of UK earners pay something like 25% of the entire income tax take. Politics of envy aside, philanthropy is a good thing, is generally done for the right reasons, and there's no evidence anyone is giving money to a particular charity out of spite so the taxman can't have it.

Yes and some of the top 1% were paying far more than their fair share of the "25% of income tax", because others in the "top 1%" were making excessive use of allowances and reliefs.

Now they are all getting a cut in the tax rate, and in return their allowances are being restricted, so the tax burden will be more fairly shared within that group.