The Megarich?

14 March 2019

The Megarich?

A Times investigation.

By John Watson

28 billionaires out of 93.  Almost one third of British billionaires live in tax havens (assuming you regard Switzerland as a tax haven and not somewhere you go to make cuckoo clocks and listen to cowbells).  So at any rate says The Times in a slightly sleazy investigation.  The sleaze here isn’t so much with the tax havens as the style of reporting.  Why is the fact that one of the girls photographed on a millionaire’s yacht was topless mixed in with comments on the fact that billionaires give money to political parties and still have wealth invested in the UK?  Could it be a “view through the keyhole” attempt to overlay political issues with a “tut these are not nice people so you don’t need to think too hard” theme.  Come, come, this is The Times, not The Guardian.  Surely it should do better than that?  After all, it doesn’t come from Manchester.

So, 28 out of 93.  Is that a lot, a few, or about what you would expect?  Presumably there are 65 still in Britain.  What is it that makes some leave and others stay?

Tax must be a factor, but what sort of factor, you wonder?  Taxes in the UK would hardly seem sufficient to drive your average billionaire abroad.  After all, the thing about billionaires is that they have plenty of money so the paying of taxes is probably irrelevant to their life style but they have no greater life expectancy than anyone else.  Suppose you are a 65 year old billionaire with perhaps another 20 or so to go, would you really sacrifice living where you wanted, abandoning your friends and relatives, just to save tax which you can easily afford to pay?  Surely not.  It has to be more complicated than that.

To answer the riddle put yourself into the place of a very successful businessman.  Your family comes from a deprived northern city.  We will call it Gangtown so as not to be unfair to anywhere specific.  Suffice it to say that it is as unpleasant as its name and that your forbears, once they were too big to go up the chimneys, graduated to going down the mine.  They were poor but honest and you were too, struggling along as a mechanic in the coal extraction industry.  Then the mine closed and you were thrown out of work but you used the enforced leisure of unemployment to do some thinking and you invented something rather good.  Perhaps it was an e-something, perhaps a mechanical something.  History does not relate but it bought in the cash and soon you were wealthy by Gangtown standards.  So what did you do?  Stay in the Council house next to the disused coal offices?  No, of course you didn’t.  You moved to a nice house in the main street.  Still the inventions flowed.  That meant more money and status too in the inventor fraternity.  Bye bye Gangtown.  Now you want somewhere where you will be surrounded by inventors and entrepreneurs.  Somewhere where you can discuss bottom lines and marketing strategies over the chardonnay.  London beckons.  A nice house in edgy Hackney perhaps?

Whether due to your new Hackney friends or the fertility of your brain, you continue to prosper and become quite well known.  People want to meet you and listen to your ideas.  You are introduced into establishment circles and you broaden your interests.  It’s top professionals and bankers you want to meet now.  The house in Hackney is sold and you move to Chelsea.  Your financial star continues to rise.  Soon it is racehorses, a box at the opera, coming out balls for your daughters, polo ponies.  In Chelsea you begin to stand out.  Envy stalks the streets and chancers try to corner you at parties to get you to invest in their schemes.  It’s time to up sticks and move to Belgravia or the Park.

Then things change again.  You become rich by international standards.  You travel to parties round Europe on your private jet.  Politicians fawn on you.  There is an audience with the Pope.  You don’t call in at your office anymore because the business is run by the managers and you can make the decisions from your yacht in the Med.  Where will you live now (when not on the yacht)?  Among other international plutocrats, of course.  Among people like yourself.  Will that be Monaco or a private island with an airstrip on which your friends will be able to land?  Of course both these options save tax but you can assuage your conscience by foundations and donations.

Now come back to earth.  As you read this you will find yourself muttering the word betrayal, but at what stage?  Was it leaving the council house which betrayed the street, or leaving Gangtown which betrayed your roots?  Or did you betray your friends in Hackney, or Chelsea or Belgravia?  All of them to a point, I suppose, but the progression could well have been the same had the last step not resulted in a tax saving.  To assume that the 28 all went primarily for tax reasons is surely an oversimplification.  Does 28 out of 93 sound a lot?  It is very hard to say.

Two other points in the investigation by The Times are worth considering.  The first is that many of those who have left have substantial property and business interests here.  There is an Alice in Wonderland touch to this when you remember how keen we are to attract investment from foreigners generally.  Japanese car firms have recently been criticised for reducing their investment here.  Is the position that we welcome investment from everyone except those who built up a fortune and then left?  It is a possible position but an odd one – provided of course that foreign owned businesses pay their proper share of UK tax.  The Public Accounts Committee takes the view that many of them do not.  That is regrettable but at least something is being done about it with the UK spearheading the drive for a new anti avoidance framework.

Less is being done about the other complaint, the ability of those who are not resident and domiciled in the UK to make gifts exceeding £7500 to political parties.  Legislation was passed to ban this but was never brought into effect.  Presumably the Tories though it was against their interest just as Labour thought that the recommendations of the Boundary Commission were against theirs.  The fact that parties invariably put their electoral prospects before the need to protect the democratic system is one of the less attractive features of British politics but there should surely be a wider enquiry about the financing of political parties.  Why should any individual, company or union, whether resident here or not, be able to buy influence?  We could prevent that if the parties were financed by the State.  A great idea in principle but there is a question of resources.  Should badly needed money go to the politicians rather than the NHS?

If you find that too difficult, why not just answer the question posed earlier: where would you like to live when your boat comes in?  I believe Bermuda is very nice at this time of year.

 

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