Taxation

Never an exciting political topic, but a very important one and one that will grow in importance over the next two years as Gordon Brown tightens the screw, I predict.

The fiasco over the 10% tax rate for private-equity firms bosses is a disaster of his own making, just like the 10% starting rate for corporation tax and the continuing failures in the Tax Credit system.

Put simply, the private equity firms turn their income into capital growth and then sell the shares. As long as the shares have been held for more than two years, the effective tax rate is 10%, and the rates that you or I pay of 22% or 40% PLUS National Insurance never come into play. It is perfectly legal and applies to everyone who sells an incorporated business and some other assets, but it was never intended that income could be wrapped up as capital and Income Tax avoided.

This just demonstrates the lack of commercial awareness of the Treasury team, and it is appalling that they have been forced to address this, rather than taken the lead. As I have mentioned before, Gordon Brown and his team seem to have an enormous blindspot for the super-rich foreigner allowing them to come to the UK and pay almost no tax. Anywhere.

The recent amnesty for people who "forgot" to declare interest earned in the Isle of Man, Jersey or Guernsey will undoubtedly hurt a lot of smallish taxpayers (and I have no sympathy, but have helped some calculate their correct tax liability) but the real big depositors will be the non-domiciled and the non-residents who are hiding ill-gotten gains for other tax authorities, and have absolutely nothing to fear from our Inland Revenue 'purge'. That being said, I really look forward to the first high-profile prosecution.