Editorial: Tax and the thinking Liberal Democrats

The impression is often created that practically all rich people in Britain are – one way or another – dodging their taxes. Either they are sheltering their income in some offshore tax haven, receiving their money through some convoluted avoidance scheme, or counting the days to ensure that they do not lose their tax breaks by staying in the UK too long. As we report today, however, there would appear to be a respectable number of very rich and successful individuals who – miraculous though it might seem – do the right and responsible thing by the country they live in.

We believe their example deserves to be highlighted far more often than it is, not only because it demonstrates the possibility of being simultaneously wealthy and decent, and not only because such individuals help to give the lie to the inevitability of a vast exodus of the moneyed to Zurich or Hong Kong if the tax rate is tweaked to their disadvantage, but because it might encourage others to do likewise, peer pressure being a big factor in changing bad behaviour. Not everyone believes British tax to be such a bad deal, even though the dominant image is of elaborate tax avoidance schemes tailored to shadowy financiers.

That said, however, the Government has much more work to do if it is to convince rank-and-file taxpayers that it is doing enough to bring the delinquents to account. Nor is it realistic to expect that everyone would follow the example of Sir Martin Sorrell and the others who feature in our report, if only they knew more about them.

This is why the Chief Secretary to the Treasury, Danny Alexander, was guaranteed a warm reception when he promised yesterday that HM Revenue and Customs would have an extra 100 staff to combat tax avoidance by people with assets of more than £1m. It is also why the decision of the Liberal Democrats to make tax the theme of their autumn conference, under the slogan, “Fairer Tax for Tough Times”, was a good one.

But it was not only, or chiefly, a good decision in terms of the party’s public profile. It is, or should be, beneficial for the Liberal Democrats in other ways. First, because the redistributive potential of tax is an area where there is little or no disagreement between the party faithful in general, and their leader, Nick Clegg. As has been evident in recent days, when Mr Clegg has said that he would not support further cuts “on the backs of the poor” without the introduction of some form of wealth tax, they have no difficulty in speaking here with conviction and with one voice.

Second, tax is an area where the Liberal Democrats can draw a real distinction between themselves and the Conservatives, never easy for the junior partner in a coalition. And third, tax is a subject on which the Liberal Democrats have something tangible to show for their efforts, which is just as difficult for a party in coalition. It was the Liberal Democrats’ idea to remove many low earners from tax by raising the income tax threshold, and it is being implemented. Their proposal for a so-called mansion tax was eventually dropped from this year’s Budget. But it was considered seriously, and a successor, in the form of some – as yet too hazily formulated – wealth tax may not yet be extinct, despite the Chancellor’s stated opposition.

Whatever the pluses and minuses of a wealth tax, however, the simpler approach in the first instance would be for the Government to ensure that its own rules on tax are not flouted and that everyone, the mobile super-rich included, pay the levies that are due. Mr Alexander’s extra tax officials may be part of the solution, but so is the example of those wealthy people who already pay up.