Thursday, August 26, 2010

Bounty hunters? Try paradise

David Cameron is right to employ bounty hunters to crack down on benefit cheats. But why stop there? What about bounty hunters to crack down on tax evaders as well?

They cost the honest taxpayer far more than the unemployed underclass.

Some estimates put the “tax gap” at £120 billion. The taxman says it’s £40 billion.

The Coalition is to employ an army of snoopers, on a five per cent commission, to trawl through people’s bills and financial records in search of benefit frauds.

No doubt they’ll find a reasonable number of people. Mr Cameron claims fraud costs the honest taxpayer £1.5 billion a year.

The benefits system is so complicated, though, that genuine mistakes by claimants and the Government come to another £3.7 billion of money “wasted”.

Some fraudsters aren’t hard to spot. Court cases crop up regularly involving the bloke who claims he’s laid up with a bad back and is out cleaning windows or someone with a gammy leg who turns out for his Sunday league side every week.

It may be that Dave’s army of curtain-twitchers and dustbin-snoopers will save us a fortune. Let’s hope so.

But if we’re taking a high moral tone about the feckless and idle, what about the rich and industrious?

We can’t really be sure how much benefit fraud costs because it’s a crime people try very hard to conceal. In the same way, nobody really knows how large the “tax gap” is either.

Her Majesty’s Revenue and Customs, our official tax-gatherers, put the figure at £40 billion. Other experts say it’s three times as much.

Either way, the Government is missing out on a vast sum of money.

The difference between what the Revenue thinks it ought to receive and what it actually gets – the tax gap – includes illegally evaded taxes and those which are legally avoided.

There is nothing wrong with making sure you tax bill is as low as possible. It’s up to the Government to make sure the laws are watertight.

If big multi-national companies and lucky billionaires can find ways to cut their tax bills and stay on the right side of the law, good luck to them.

Some people claim it’s immoral to keep your tax bill to the legal minimum. But few of us would willingly pay more tax than necessary – especially when we see how much of it is wasted. Morality has nothing to do with it.

Tax avoidance is fair and reasonable. It’s up to the Treasury to deal with loopholes in the law.

But there would be no harm in appointing an army of bounty hunters to go after individuals and companies which actively evade paying tax.

Imagine who might fall into that category. For instance anyone who has paid a builder in cash, to avoid the VAT, or failed to declare their earnings, could be ripe for investigation.

The black economy – or “shadow economy” if you’re politically-correct – is worth billions and set to grow when VAT hits 20 per cent in January.

But a few cash-jobs are chicken-feed. From time to time we hear of great HMRC triumphs when a gang of VAT cheats or cigarette smugglers get brought to justice.

In May, 21 people, including nine men from the West Midlands, was jailed for a £37.5 million VAT fraud.

Last month, Wolverhampton car-parts dealer Balbir Baden was jailed for evading £270,000 of VAT and income tax.

Even these cases are only the tip of the iceberg.

HMRC says in its annual report that “the proportion of UK taxpayers who are willing and able to pay their taxes has increased from 49.1 per cent to 51.6”.

This is apparently seen as something of a success. But it means that almost half of the people and companies in Britain are either unwilling or unable to cough up. That’s a lot of potential for our bounty-hunters.

One of the most bizarre legacies of Gordon Brown’s time at the Treasury is that he spent many years cutting down the number of tax-gatherers.

For someone desperate to spend our money, it’s surprising he was so negligent about collecting it all in the first place. But he was.

As a result, the revenue doesn’t have enough experienced staff to crack difficult tax cases. They are far more likely to come down hard on the corner shop-owner than they are on the multi-national corporation.

There are one or two household name businesses which manage to pay little, if any, tax in this country or anywhere else for that matter.

So why doesn’t the Government accept its own customs men aren’t up to the job and hand the task of chasing the missing billions to the private sector?

The vast sums of revenue the Government misses out on – maybe more than ten times as much as it pays out to benefit fraudsters – must be worthy of investigation by a few privatised bounty hunters.

There is a simple alternative, of course. Cut taxes so drastically it’s no longer worth trying to evade payment and Government income would actually go up. Unfortunately, that doesn’t seem to be an option.

Friday, August 13, 2010

We can still make it

Anyone with any sense watches “Top Gear”. The larking about by Jeremy Clarkson, James May and Richard Hammond is the only thing that saves the BBC from drowning in political correctness.

But they did something unusual for the last episode in the series. They performed a requiem for the British motor industry buy taking a Lotus Elan, a TVR S2 and the Jensen Healey for a spin across the country.

They visited the shut down Jensen factory in West Bromwich and went on to the similarly abandoned TVR plant in Blackpool.

There was plenty of messing about and schoolboy pranks on the way but in the end this was a plaintive lament for the death of the British motor industry from three of its all-time fans.

At one point in the show, Clarkson kicks around the Jensen factory and says: “In the 1970s, 26 per cent of the British workforce was employed by manufacturing. Today it’s nine per cent. It’s not that we don’t make sports cars any more – we don’t make anything.”

The other day I drove past the old Longbridge plant in Birmingham, once the biggest car-factory in Europe. A bit of building is going on but most of it’s a flattened wasteland.

For someone who was brought up just down the road from “the Austin”, it’s a sorry sight.

Even so, Clarkson and co are wrong. The British car industry is not dead. Actually, it is alive and well.

The difference these days from the lamentable past is that it’s foreign-owned and the unions seem to have learned their lesson the hard way.

Globalisation, consolidation and rationalisation put paid to the dozens of famous old names and marques we used to know and love.

Instead, the industry is owned by a handful of multi-nationals. Like the big banks, some of them are incompetently run and rely on Government handouts to keep them alive – just ask General Motors.

Yet while successive British Governments have cared less and less about the ability of this country to make things, somehow industry has carried on regardless.

Astonishing as it may seem, British factories are manufacturing hundreds of thousands of cars a year. And many of them are being exported to foreign countries.

We are not the world power we once were when it comes to sheer numbers. We’re 11th in the world car-production league table which puts us behind Brazil, Mexico, Canada and Spain but we’re still ahead of Italy.

Jensen Motors ceased trading in 1976. The following year, according to the Society of Motor Manufacturers and Traders, British industry manufactured no fewer than 1,315,972 cars and commercial vehicles.

That was, admittedly, down on the 1.9 million the industry hit at its peak in 1972 but even in 1976 people were talking about the death of British manufacturing –warning it was on the way unless the unions backed off.

They didn’t, as we all know, and so famous companies started to go to the wall. A lot of old names are no more: Hilman, Riley, Triumph and Sunbeam to name but a few.

Even so, new models and new manufacturers have taken their place. This country still makes Minis, for instance, and very successful they are too.

OK, so they are made in Oxford by German-owned BMW but, given the fiasco that MG Rover became after it was flogged off to the Phoenix Four, we’re lucky anything was salvaged from the wreckage.

Meanwhile companies like Ford and Vauxhall continue to make cars here as well as Nissan, Toyota and Honda.

Because they’re foreign-owned there is, perhaps, more chance that they will abandon ship and go elsewhere. But plenty of British-owned companies have done that already so patriotism won’t help much either way.

What we can say, though, is that things have not got any worse since Jensen stopped making cars in West Bromwich.

The British motor industry may employ fewer people but that’s because the manufacturing processes are so much better. And it churns out pretty much the same number of cars we were making 34 years ago.

In 1980 we made 1.3 million vehicles in this country. In 1990, the number had risen to 1.5 million. In 2000, it was 1.8 million and was still at 1.6 million in 2008.

Admittedly last year was a nightmare for car-makers. As we all know, factories shut down for months on end and nobody wanted to buy anything because of the credit crunch and the recession.

In 2009, the number of vehicles made in this country only just squeezed above the one million mark at 1,090,139.

But the industry has bounced back this year. In the first six months, we made 701,266 vehicles. And guess what? No fewer than half a million of them were for export.

We might not make Jensens and TVRs any longer but Clarkson is wrong to sound the death knell for British manufacturing. We still have the engineering, the design, the technology and the workers to compete in world markets.

It’s just a pity we don’t seem to have the bosses and the investors to lead the way.