BLOG
143
EU MIGRANTS CAN AVOID TAX IN UK
Credit where credit’s due. That’s the Sunday Telegraph’s headline, not
something that I thought up. Their
article starts, “Romanians and Bulgarians coming to work can avoid paying taxes
in Britain because of a loophole”. I
hope that by now that you are as angry as the three (yes three) Sunday
Telegraph journalist that it took to unearth this new tax avoidance scandal
(that’s my word not the Telegraph’s).
In case you have not seen the article,
it goes on to explain that they still have to “pay taxes at home” and that the
income scandal is that, “The rules allow European workers “posted” (sic) to
Britain for less than two years to pay National Insurance and, in some cases, income
tax in their own country. Almost 100,000
EU immigrants already in Britain are taking advantage of the regulations”.
I am not clear why the article should
start by singling out Romanians and Bulgarians.
I have read the Sunday Telegraph since it began publication and don’t
recollect it having previously complained about French and German tax
avoiders. Or, indeed about US ones,
because the NI treaty that we have had for many years with the EU is similar to
that which the UK has with the US, and Australia, and a number of other
countries. And it’s nothing new. We have had such treaties for as long as I
can remember. It seems commonsense to
me. The main NI benefits are the State
pension and jobseekers allowance.
Assuming an average working life of 47 years, the pension entitlement from
contributions for a period of under 2 years is so small that it is probably not
worth the government having to record it.
It surely makes far more sense for someone who is going to be here for
under two years to remain in his home country’s social security system? At least that makes sense to me, even if it
does seem utterly ridiculous to Sunday Telegraph journalists.
So what about income tax? Actually it’s nothing to do with the EU, but
most of our double tax agreements do indeed provide that a person sent to the
UK by his foreign employer is not taxable on his earnings here if he is present
here for less than 183 days in the tax year, is employed and paid by a non-UK
employer and the remuneration is not borne by a fixed base which the employer
has in the UK. Again, do we really want
to spend taxpayer money on collecting taxes from people who work here for a
very short period, are unlikely to be tax resident here, and whose salary is a
deduction in calculating the employer’s profits not here, but in another
country? It seems to me to make a lot of
sense all round to leave it to the worker’s home country to tax him.
Particularly because this works both
ways. If I send one of CBW’s staff to
New York to do a job for a couple of weeks, the USA does not tax him. The UK gets to tax him on his US work. Is that wicked? If not, why should it become wicked if a
Bulgarian CBW equivalent sends one of its staff to London for a couple of weeks?
And is a person who comes to the UK for
a couple of weeks – or longer but for less than six months – actually a migrant,
as the Telegraph would have us believe?
I would myself describe such a person as a visitor; surely a migrant is
someone who comes to live here; not someone who is posted by his overseas
employer to work here for a short period and return home.
The Telegraph’s real gripe seems to be
that the rate of income tax in Bulgaria is only 10% and that in Romania is
“just 16%”. Actually the personal
allowance in Romania is very low as compared with almost £10,000 here. The effective UK tax rate on someone earning
£30,000 p.a. is 13.7%, which is actually less than in Romania. And the Sunday Telegraph did not mention that
the lower headline income tax rate in Romania is balanced by the fact that VAT
there is 24%, as compared to 20% in the UK.
It is depressing that the Press still
seems eager to put vast resources into trying to discern tax avoidance in
places where it is clear none exists.
There are differences in tax rates between virtually all countries, as
each raises the funds it needs to meet its differing economic objectives in
different ways. For someone to regard
those differences as giving rise to tax avoidance is ridiculous.
What is perhaps most depressing is that the
Sunday Telegraph ends its article by pointing out that John Cridland, the Director-General
of the CBI says that, “free movement needs to be about people coming here to do
jobs and pay tax!” I am unclear if this
means that the CBI share the Sunday Telegraph’s apparent view that a person
seconded to the UK for a short period by his foreign employer should pay UK
tax. Personally, I think that everyone
should obey the law. If this provides a tax
liability here, it should be paid; if it does not, there is no earthly reason
why anyone should volunteer to pay tax that parliament has not sought to
impose. I would have hoped that the CBI
would share that view.
ROBERT
MAAS
