Barbara Muldoon, an anti-racism campaigner from Belfast, is facing criminal charges for taking pa
The Tax Dodges of the Rich
The Tax Dodges of the Rich
Ever heard of Nicholas Ferguson? If not, you may at least be familiar with his notorious boasting. Nick is the multi-millionaire boss of private equity firm, SVG Capital, and he made the headlines when he bragged about paying only 5% tax on his obscenely huge profits while his cleaning lady hands over 21% of her meager wages to the tax man.
Leona Helmsley would have been proud of Mr Ferguson. The hotelier, property speculator and one of America’s richest women, famously opined that “taxes are for little people”.
It seems she was right. Figures released by the Revenue Commissioners show that several of the highest earners in Ireland pay no tax whatever, while 1,060 with incomes above €100,000 a year pay less than 5% tax. And these weren’t tax exiles - they live in Ireland.
Tax not collected on the earnings of Ireland’s super-rich could amount to €3 billion a year, experts reckon.
Don’t tax the rich! Cut social welfare benefits by 3% instead, says Danny McCoy, chief economist with IBEC, the Irish bosses organisation. IBEC, of course, has campaigned tirelessly for the creation of tax avoidance schemes and the preservation of tax loopholes to ensure their wealthy members pay as little tax as possible.
And they won’t need to pay more tax if the poor can be clobbered instead! No fool, McCoy.
TAXES were invented by kings to pay for their wars, but with the growth of the workers’ movement under capitalism, taxes came to be used as a means of redistributing a portion of surplus wealth from rich to poor - not from a sense of fairness but to buy social peace and ensure workers were fit enough to work, reproduce, and generate profits.
A moderately redistributive tax regime may be in the long term interests of the ruling class as a whole, but that doesn’t mean that individually they like paying taxes. Hence our tax system is riddled with exemptions, all for their benefit.
If you are a PAYE worker, of course, tax avoidance schemes are of little use, even if you could afford a tax lawyer to explain how to pull a fast one. To benefit fully from tax loopholes, you need to earn profits, not wages, and you need to own capital, not just your own labour power.
Take Capital Gains Tax, CGT. When the Fianna Fail-PD government halved CGT from 40% to 20%, they were fiercely criticised by the left and the likes of St Vincent de Paul as well.
Their reply was that the lower the tax on people who make their money selling property, shares, or businesses, the more tax would flow in, because rich people wouldn’t try to avoid a 20% tax on their gains whereas they would try to avoid 40%.
GERRY’S LITTLE SCAM
Mary Harney never tired of trotting out such sophistry in defence of low taxes on her filthy rich buddies.
But just how threadbare such logic is was revealed last month when Harney’s pal and one-time PD election candidate, Gerry McCaughey, along with his business partners, were found to have used a loophole in the tax laws to avoid paying a single cent of Capital Gains Tax on the profits they made by selling their building company, Century Homes.
Just before building materials company, Kingspan, acquired Century Homes, Gerry, his brother Gary, and a third shareholder, James McBride, transferred their shares in the company to their wives. The transfer of assets between spouses attracts no Irish tax.
Although all three husbands lived in Co Monaghan, their wives “lived” in the luxury resort of San Remo, Italy, and a few weeks after acquiring ownership of the shares, the wives sold them to Kingspan for €100m.
Thanks to a double taxation agreement between Ireland and Italy, the wives paid no Irish tax on the proceeds of the sale and as a result, the Irish exchequer lost almost €5m in revenue.
Tax consultants, KPMG advised McCaughey & Co not to blab too widely about the tax dodge as it is reserved for their richest clients only, like Shane Ryan, son of Ryanair founder, Tony Ryan, who pulled the exact same trick.
Shane’s brand new wife, Lorraine, “emigrated” to Italy just before acquiring €18m worth of shares from her loving hubby. Lorraine then flogged the shares for €19m and paid a tiny amount of tax in Italy on her modest capital gain. But Shane, who had made a fortune on the transaction, paid not a cent of tax to the Irish exchequer.
The Revenue Commissioners challenged the Ryans in court - and lost. But the loophole was left open by the government for the McCaugheys to exploit.
THE SPECULATORS SCAM
Another massive tax loophole was revealed recently in the Anglo Irish Bank scandal. By using a device called a Contract for Difference, or CFD, wealthy speculators can make a killing on shares without ever having to buy them - they gamble on the difference in share prices between one date and another. As a result the exchequer loses all the taxes and duties that normally apply when actual shares are traded.
When he was Minister for Finance, Brian Cowen, proposed taxing CFDs, but then changed his mind when lobbied by tax accountants for Fianna Fail’s wealthy cronies.
Cowen also presided over another loophole used by his developer pals. When they wanted land to build houses on, instead of buying it, developers would pay the landowners a “licence fee” for permission to build on their land. As ownership of the land wasn’t transferred to the developers, they avoided paying hundreds of millions in stamp duty. The government passed a law against this loophole, but Cowen didn’t bother implementing it until the building boom was over.
Developers could also pay their own subsidiary companies below cost to build houses. The subsidiary made a loss while the developer made a bumper profit. Huge losses were written off against income tax at 41%, while mega profits were taxed as capital gains at just 20%.
The biggest loophole of all is the residency rule that says you have to live in Ireland for more than 183 days a year before you become liable for Irish taxes on all your income. Almost 6,000 people on Revenue’s books have declared themselves “non resident for tax purposes”. They include Ireland’s richest businessmen: Denis O’Brien, Dermot Desmond, John Magnier, and JP McManus, to name but a few.
And it’s not just loopholes that enable the very wealthy to shirk taxes. The government has gone out of its way to create tax avoidance schemes for its richest supporters.
For years, property speculators who bank-roll Fianna Fail benefitted from so-called Section 23 Tax Relief which meant they paid no tax at all on their rental income until they had recouped the cost of the properties in which they had invested.
The most recent tax avoidance scheme allows those with lots of spare cash to avoid paying tax on their income by investing their capital in the provision of hospice facilities.
It was Mary Harney who promoted a tax avoidance scheme for her wealthy backers who wanted to make even more money out of the sick by building private hospitals in the grounds of public hospitals. Harney’s determination that investors in private health care will pay no tax on their profits has encouraged meat industry fraudster Larry Goodman to chance his arm in the health care “business”, along with Ulick McElvaddy, the man who hailed crooked banker Sean Fitzpatrick as a “national hero”.
And if you have been wondering why massive hotels have suddenly sprung up all over the country, well, they too are the product of another outrageous tax avoidance scheme introduced at the behest of barristers, stockbrokers and consultants who were looking for somewhere to invest their loot. Like all these schemes, the investors will pay no tax on their income until they have earned back their initial capital outlay.
What all these schemes have in common is that they enable the very rich to get richer still at the expense of the little people who have no alternative but to pay their taxes in full.
It certainly beats working.
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