Life under a Labour Government!
Two new mega-polls have forecast that the Conservative Government will not just lose the next election but suffer a wipeout. The Survation and YouGov surveys predict the Tories will plummet to 98 and 155 seats, respectively. It also looks likely that 11 Cabinet members will lose their seats, including the Chancellor, Jeremy Hunt, Jacob Rees Mogg, Grant Shapps, and possibly even Rishi Sunak.
According to Katy Balls in The Spectator, the word ‘landslide’ doesn’t capture the scale of it. The article says that the Tories could be reduced to a rump of about 100 MPs, and Keir Starmer will have one of the most significant majorities in parliamentary history.
What can we expect?
Traditionally, when Labour gets into power, it takes many of the Tory ideas and squeezes them until the pips squeak.
In his last Budget, Jeremy Hunt announced changes to the non-dom regime. A trailblazer of the Labour Party to raise additional finance.
When asked what Labour would do to meet the shortfall of its spending plans, Rachel Reeves said she planned to raise the extra revenue by clamping down on tax evasion.
This is such an old chestnut that it can hardly be considered radical - but ironically, now is the time when it could prove to be a groundbreaker.
Since the Tories have been in power, the focus has been on getting the information needed to prove tax was due. The Panama Papers and the Paradise Papers were shocking examples of how inadequate its efforts to secure reliable information were that it resorted to paying for stolen information.
Then, in 2010, the US passed a federal law, the Foreign Account Compliance Act (FATCA), which required all non-US Foreign Financial Institutions (FFIs) to search their records for US citizens' clients. They were obliged to report all assets held and activity during that year of US citizens and then to report annually to the US Department of the Treasury,
Of course, non-US FFIs are not subject to US law, so to make them comply, the IRS demanded that non-US FFIs enter into an agreement with their IRS to report on their account holders and withhold 30% on payments to foreign payees if such payees did hot comply with FATCA. Much to everyone’s surprise, foreign FFIs complied.
Spurred on by FATCA's success, the OECD launched its own initiative, the Common Reporting Standard (CRS). OECD countries (except the US, which by then had what it wanted) agreed to the automatic exchange of information on accounts held in their jurisdictions by non-residents with the country's tax authority in which the account holder was a tax resident.
As you might expect, small financial centres with little or no direct taxes have little to gain from complying with these onerous laws. To make them comply a system of ‘penalties’ was introduced on countries which did not meet the standard of compliance and were forced to comply.
As a result, from 2017/2018, HMRC and similar tax authorities worldwide have been deluged with information from foreign tax authorities. To date they are only adjusting to demands with extra staff and training.
At the same time HMRC, Andrew McKenna, former co-head of the Offshore Compliance and Fraud Department of HMRC, who you can hear talking to me in Episode 21 of How to Keep Your Money, says the government has invested £100 million into a ‘Social Network Artificial System Digital Mechanical Compliance System called Connect. This computer system has access to and can analyse the data from your credit and debit cards, flights, hotels and similar spending patterns and compares them against your declared income. It also has access to the Land Registry and Google Earth. If your lifestyle does not match with the information HMRC has on file it will come knocking.
The inspector may take a different view from the advice you received, so the fact that you have taken advice is no defence to raising a claim for the tax and penalties, which is 100% minimum.
The Tory party spent over a decade implementing these building blocks to catch tax cheats. But it is only now that HMRC can begin to see the benefits—and no doubt the Labour Party will take the scalps as their own.
However, it is not only the tax authorities who will be after the riches of the wealthy in years to come as the Labour Party put on the thumb screws. Many people want the money of the wealthy, whether from the next generation, charities or criminals
My prediction is that the services of our guest this week on our How to Keep Your Money podcast - Arabella Murphy founder and CEO of Propititious will be much in demand. She sits on the same side of the table as her clients. She does not peddle the solutions dictated by her profession. Still, she listens before deciding the best course of action and who to go to seek advice and where necessary can mediate to resolve disputes.